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The impact of carbon emission trading policy on firms’ green innovation in China

Author

Listed:
  • Hongxin Yu

    (Shanghai Business School)

  • Yaohui Jiang

    (Shanghai University of Finance and Economics)

  • Zhaowen Zhang

    (Shanghai University of Finance and Economics)

  • Wen-Long Shang

    (Beijing University of Technology
    Beijing Jiaotong University
    Imperial College London)

  • Chunjia Han

    (Birkbeck, University of London)

  • Yuanjun Zhao

    (Nanjing Audit University)

Abstract

This study aims to examine the green innovation effect of the carbon emissions pilot policy in China. First, using the difference-in-differences method and regressions of instrumental variables using the data from Chinese listed firms, we verify that the policy promotes green innovation among regulated firms and is more pronounced among state-owned enterprises, firms in the eastern region, and those with lower financing constraints. Furthermore, this positive effect spreads downstream relative to the regulated firms through input–output linkages, but reduces green innovation to upstream firms. Accordingly, such diffusion of innovation is achieved through the price mechanism. The results necessitate the introduction of various derivatives to mobilize the market to reduce the speculative volatility of carbon prices. In addition, relevant supporting policies must be established to encourage corporate innovation to reduce the crowding-out effect owing to emission reduction and the nonmarket factors.

Suggested Citation

  • Hongxin Yu & Yaohui Jiang & Zhaowen Zhang & Wen-Long Shang & Chunjia Han & Yuanjun Zhao, 2022. "The impact of carbon emission trading policy on firms’ green innovation in China," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-24, December.
    • Handle: RePEc:spr:fininn:v:8:y:2022:i:1:d:10.1186_s40854-022-00359-0
    DOI: 10.1186/s40854-022-00359-0
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    Cited by:

    1. Zhou, Wenbin & Cleaver, Christopher J. & Dunant, Cyrille F. & Allwood, Julian M. & Lin, Jianguo, 2023. "Cost, range anxiety and future electricity supply: A review of how today's technology trends may influence the future uptake of BEVs," Renewable and Sustainable Energy Reviews, Elsevier, vol. 173(C).
    2. Han Long & Gen‐Fu Feng & Qiang Gong & Chun‐Ping Chang, 2023. "ESG performance and green innovation: An investigation based on quantile regression," Business Strategy and the Environment, Wiley Blackwell, vol. 32(7), pages 5102-5118, November.
    3. Xiao Yang & Wen Jia & Kedan Wang & Geng Peng, 2024. "Does the National Carbon Emissions Trading Market Promote Corporate Environmental Protection Investment? Evidence from China," Sustainability, MDPI, vol. 16(1), pages 1-22, January.
    4. Dong Xue & Tongyang Liu & Xiaomin Li & Xiaolei Zhao, 2023. "Can the Digital Economy Accelerate “Carbon Neutrality”?—An Empirical Analysis Based on Provincial Data in China," Sustainability, MDPI, vol. 15(14), pages 1-26, July.
    5. Wei, Jia & Wen, Jun & Wang, Xiao-Yang & Ma, Jie & Chang, Chun-Ping, 2023. "Green innovation, natural extreme events, and energy transition: Evidence from Asia-Pacific economies," Energy Economics, Elsevier, vol. 121(C).

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