Abstract: The implementation goal of the emission trading system is to achieve a win-win situation for pollution reduction and green development. In order to evaluate the effectiveness of the emissions trading system, this paper takes the paid use and trading system of emission rights in 2007 as a natural experiment, and using PSM-DID method to analyze the overall pollution reduction effect, sustainable pollution reduction effect of the paid use and trading system of emission rights on air pollution and wastewater pollution and the green development effect of the system. Based on the results of China’s provincial panel data from 2001 to 2015, it is shown that: ①The implementation of the paid use and trading system of emission rights significantly reduces China’s industrial waste water discharge and industrial sulfur dioxide emissions, it shows that the system is effective in reducing pollution emissions during the sample period. ②The paid use and trading system of emission rights has a continuous emission reduction effect on industrial sulfur dioxide, but the emission reduction effect of industrial sewage is only manifested in the initial stage of the implementation of the system, it shows that compared with the sulfur dioxide emissions trading, the emission reduction effect of wastewater discharge rights trading is limited. ③At present, the implementation of the paid use and trading system of emission rights has not significantly promoted the development of green total factor productivity and green technology, it shows that the system is not significant for achieving green development goals in the short term. Therefore, in the future, China should continue to implement the current emission trading system in air pollution control. Long-term governance should be carried out by means of government intervention and other means because waste water pollution is affected by pollution emissions and concentration of pollution sources. In order to achieve the long-term goal of China’s green development, the current emissions trading system needs to be adjusted and implemented in a timely manner as economic development and environmental changes.

Keywords: green development; pollution emissions; emissions trading; total factor productivity; technological progress; PSM-DID