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The hidden benefit: Emission trading scheme and business performance of downstream enterprises

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  • Jia, Zhijie

Abstract

There seems to be no empirical study on the impact of emission trading scheme (ETS) on downstream industries. However, carbon trading may affect the performance of downstream firms via cost effect or spillover effect through the industrial chain. Based on the data of listed companies, this paper innovatively constructs three-dimensional data of “upstream firm - downstream firm - time”, with a total of 40,437,001 valid observations, simulates the upstream and downstream relationship between enterprises, and estimates the impact of carbon trading on the downstream performance using the Pair Weighted Difference in Difference in Difference (PW-DDD) model. The results show that the effects of carbon trading on downstream performance is negative in the short run, but it has positive significance in the long run. Heterogeneity is also found: the downstream firms with significant industrial chain relationships are more positively affected, such as chemical, petrochemical, and cement. In addition, carbon trading may improve productivity in different sectors in the same region or the same industry in other areas, thus improving the performance of non-ETS-covered enterprises.

Suggested Citation

  • Jia, Zhijie, 2023. "The hidden benefit: Emission trading scheme and business performance of downstream enterprises," Energy Economics, Elsevier, vol. 117(C).
    • Handle: RePEc:eee:eneeco:v:117:y:2023:i:c:s014098832200617x
    DOI: 10.1016/j.eneco.2022.106488
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