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The Impact of Carbon Pricing on Corporate Sustainability: Evidence From the European Union

Author

Listed:
  • C. José García
  • Begoña Herrero
  • Francisco Morillas‐Jurado

Abstract

The European Union (EU) has played a leading role in the fight against climate change. One mechanism used to meet the targets for global greenhouse gas (GHG) emission reductions is carbon pricing. A prominent example is the EU Emissions Trading System (EU‐ETS). This study examines the effectiveness of political decisions to pursue environmental objectives from a firm‐level perspective. The aim of this research is to analyse how carbon prices affect firm‐level GHG emissions and environmental innovation. We also examine the relationship between environmental innovation and corporate GHG emissions, both independently and after including the effects of carbon pricing. Our findings show that carbon prices have a negative relationship with corporate CO2 emissions and a positive relationship with green innovation in low‐carbon technologies. Our results confirm that green innovation exerts a limited impact on GHG emissions, with carbon prices acting as the main driver of corporate GHG emission reductions.

Suggested Citation

  • C. José García & Begoña Herrero & Francisco Morillas‐Jurado, 2026. "The Impact of Carbon Pricing on Corporate Sustainability: Evidence From the European Union," Business Strategy and the Environment, Wiley Blackwell, vol. 35(3), pages 3218-3232, March.
    • Handle: RePEc:bla:bstrat:v:35:y:2026:i:3:p:3218-3232
    DOI: 10.1002/bse.70324
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    References listed on IDEAS

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