Can China’s carbon market policy promote inter-city green collaborative innovation?

This study uses a combination of theoretical models and empirical research to elaborate on whether and how China’s carbon market policy (CMP) affects inter-city green collaborative innovation (GCI). We use the analytical framework of the new economic geography theory to construct an environmental knowledge innovation spillover and diffusion model. Then, we used the data from 342 cities in China between 2002 and 2021. The results indicate that the implementation of the CMP has led to a 35.1% increase in the inter-city GCI. Moreover, the CMP has a greater effect on promoting invention-type GCI, besides, when both cities in city pair are within the scope of the carbon market pilot, there is a stronger collaborative innovation effect. The CMP enhances inter-city GCI when integrated with low-carbon and new energy city pilot policies. Additionally, when the CMP incorporates a pricing or supply adjustment mechanism, its effectiveness in promoting inter-city GCI becomes even more robust. Further analysis indicates that the mobility of talent, information flow, capital accumulation, and the material flow associated with the emergence of new enterprises are the key mechanisms through which CMP drive inter-city GCI. Finally, we discussed the policy aftereffects and found that implementing the CMP will sustainably enhance the capacity of inter-city GCI.