## 1 Introduction  
Greenhouse gas emissions will aggravate the environmental negative externalities on global economic development and restrict the sustainable development of human society. A carbon emission trading system (EST) is a powerful channel for emission reduction and alleviating global warming [1]. According to relevant authorities, the global carbon trade system reached 150 billion tons in 2012, and it has replaced the oil market as the largest trading market. With the completion of relevant agreements and the construction of ETS systems in the major economies of the world, the trading volume in 2020 is expected to approach 3.5 trillion. Following the \"Kyoto Protocol\" and the \"United Nations Framework Convention on Climate Change,\" the European Union fully launched its ETS in 2005, which was the first ETS in the world and is the international ETS with the most successful operations and widest coverage [2]. New Zealand, South Korea, and other countries have launched mandatory nationwide domestic ETSs. Starting with the voluntary Chicago Climate Exchange (CCX), the United Sates has tried to establish mandatory systems and has gradually established regional ETSs, such as the Regional Greenhouse Gas Initiative (RGGI). As the largest carbon emitter in the world, the establishment of an ETS in China will have a significant impact on global carbon emissions control [3]. China has formally launched a pilot project for ETS from 2013 to 2014, which included Beijing, Tianjin, Shanghai, Chongqing, Guangdong, Hubei and Shenzhen, and gradually began expanding its ETS nationwide starting in 2017. In the initial implementation of the ETS, Shenzhen, Beijing, and Shanghai included many non-industrial enterprises, covering construction and service industries; while Guangdong, Tianjin, Hubei, and Chongqing were mainly industrial enterprises. The principle of quota allocation is mainly based on the baseline method and the historical intensity method, using a combination of free allocation and auction. It will cover approximately 3.5 billion tons of carbon emissions from more than 1700 enterprises in the electric power industry, which accounts for nearly 39% of the CO\({}_{2}\) emissions in China, and the trading volume will far surpass the current largest ETS--the EU-ETS. However, the full establishment of China's ETS will face tremendous challenges. Due to the short implementation time of China's ETS and its immature mechanism construction, it is difficult to accurately calculate the emissions standards included in the industry except for the power industry. Although there are various types of carbon financial products, the actual scale of transactions on the market is limited. Therefore, there are many uncertainties about the effects of ETS. How can emission reduction be achieved without negative economic effects? Could it achieve some positive economic effects? Most scholars generally believe that pilot projects can achieve emission reduction, but they have different opinions on whether they can simultaneously achieve economic effects, and some of them think that environmental regulations will decrease GDP [4; 5; 6]. In contrast, some believe that reasonable environmental regulations would stimulate the \"innovation compensation\" effect, which would compensate for the related costs of environmental regulations and also promote carbon productivity and international competitiveness. Thus, it would promote positive economic effects [7; 8], that is, the realization of the famous \"Porter hypothesis\" effect [9; 10]. The existing literature mainly focus on the evaluation of the effect of a pilot project based on the \"Porter hypothesis,\" but there are no deep studies on the heterogeneity of economic development and industrial development. Do the economic development differences affect the final implementation effect of ETS? How do the industrial development differences in pilot provinces and cities affect the emission reduction effect and economic effect? This study is focused on solving these problems as follows.