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Market-based environmental regulation and corporate ESG performance: Evidence from China

Author

Listed:
  • Chen, Minjuan
  • Chen, Honglin
  • Liu, Siying
  • Liu, Yanping

Abstract

As a new type of market-based environmental regulation, the carbon emissions trading pilot policy is a critical tool to help China achieve sustainable development. Using panel data of Chinese A-share listed companies from 2006 to 2020, this paper employs a staggered difference-in-differences (DID) model and finds that the carbon emissions trading pilot policy positively influences the ESG performance of enterprises in the pilot regions. This effect is driven by promoting green innovation and public environmental awareness. Additionally, it is observed that customer concentration plays a positive moderating role in this process. Through group-wise regression analysis, we further discover that for state-owned enterprises, enterprises in highly regulated industries, and those located in regions with advanced digital economy development, the positive effect of this pilot policy is enhanced by at least 26 %.

Suggested Citation

  • Chen, Minjuan & Chen, Honglin & Liu, Siying & Liu, Yanping, 2025. "Market-based environmental regulation and corporate ESG performance: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 2006-2022.
    • Handle: RePEc:eee:ecanpo:v:87:y:2025:i:c:p:2006-2022
    DOI: 10.1016/j.eap.2025.08.002
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    References listed on IDEAS

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    1. Duan, Dingkang & Wei, Ran & Wang, Chao & Xia, Bingyu, 2025. "Opportunity or obstacle? Climate risk disclosure and corporate ESG performance," International Review of Economics & Finance, Elsevier, vol. 100(C).

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