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The impact of pilot carbon market on firms' performance in China

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  • Luan, Limin
  • Liu, Pengfei
  • Mei, Yingdan

Abstract

The pilot carbon market is a vital policy tool in China's pursuit of its carbon peak and neutrality goals. Different trading mechanisms within these pilot markets create varying economic incentives in carbon trading, leading to differentiated impacts on corporate financial performance. This study analyzes the effects of carbon market trading mechanisms on firm performance by examining trading regulations in pilot carbon markets. Our findings reveal that regulated enterprises exhibit significantly better average economic performance than unregulated enterprises following the implementation of carbon market pilots. We also identify that total volume determination, initial quota allocation mechanisms, and quota offset mechanisms significantly influence corporate performance. Specifically, carbon emissions trading enhances enterprise economic performance more effectively when pilot carbon markets adopt predetermined total allowances, conduct allowance auctions, or allow for a higher proportion of allowance offsets.

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  • Luan, Limin & Liu, Pengfei & Mei, Yingdan, 2025. "The impact of pilot carbon market on firms' performance in China," Energy Economics, Elsevier, vol. 142(C).
    • Handle: RePEc:eee:eneeco:v:142:y:2025:i:c:s0140988324008739
    DOI: 10.1016/j.eneco.2024.108164
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    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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