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Environmental regulation and green innovation: Evidence from China's carbon emissions trading policy

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  • Liu, Menghe
  • Li, Yuxiao

Abstract

This paper investigates the impact of environmental regulation on green innovation to explore how to achieve a win-win situation of environmental protection and economic development. Using green patent data of listed companies in heavy polluting industries from 2011 to 2016, we find that China's carbon emissions trading pilot policy has induced green innovation of firms in pilot areas. The positive effect is greater for invention patents, large-scale firms, non-state-owned firms and firms with high external attention, which support the channels of internal benefit-cost tradeoffs and external pressure. Our study provides insights which aid in the design of environmental regulation.

Suggested Citation

  • Liu, Menghe & Li, Yuxiao, 2022. "Environmental regulation and green innovation: Evidence from China's carbon emissions trading policy," Finance Research Letters, Elsevier, vol. 48(C).
    • Handle: RePEc:eee:finlet:v:48:y:2022:i:c:s1544612322002811
    DOI: 10.1016/j.frl.2022.103051
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    References listed on IDEAS

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    Cited by:

    1. Gao, Yihong & Gao, Jiayan, 2023. "Low-carbon transformation and corporate cash holdings," Finance Research Letters, Elsevier, vol. 54(C).
    2. Hong Chen & Haowen Zhu & Tianchen Sun & Xiangyu Chen & Tao Wang & Wenhong Li, 2023. "Does Environmental Regulation Promote Corporate Green Innovation? Empirical Evidence from Chinese Carbon Capture Companies," Sustainability, MDPI, vol. 15(2), pages 1-24, January.
    3. Cheng, Yuanyuan & Du, Kerui & Yao, Xin, 2023. "Stringent environmental regulation and inconsistent green innovation behavior: Evidence from air pollution prevention and control action plan in China," Energy Economics, Elsevier, vol. 120(C).
    4. Deng, Haiyan & Zhang, Wenjia & Liu, Dan, 2023. "Does carbon emission trading system induce enterprises’ green innovation?," Journal of Asian Economics, Elsevier, vol. 86(C).
    5. Gan, Jiawu & Liu, Lihua & Qiao, Gang & Zhang, Qin, 2023. "The role of robot adoption in green innovation: Evidence from China," Economic Modelling, Elsevier, vol. 119(C).
    6. Xu, Xiaofeng & Cui, Xiaodan & Chen, Xiangyu & Zhou, Yichen, 2022. "Impact of government subsidies on the innovation performance of the photovoltaic industry: Based on the moderating effect of carbon trading prices," Energy Policy, Elsevier, vol. 170(C).
    7. Gu, Yun & Yang, Zhaohui, 2023. "The more red the greener? How the Communist Party of China's party organizations influences corporate green innovation," Finance Research Letters, Elsevier, vol. 55(PA).
    8. Long, Wenbin & Qu, Xin & Yin, Saifeng, 2023. "How does carbon emissions trading policy affect accrued earnings management in corporations? Evidence from China," Finance Research Letters, Elsevier, vol. 55(PA).

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