IDEAS home Printed from https://ideas.repec.org/a/eee/energy/v309y2024ics0360544224029323.html

Can carbon market efficiency promote green technology innovation for Chinese companies?

Author

Listed:
  • Wang, Dan
  • Sun, Mili
  • Meng, Bo
  • An, Yunbi
  • Cheng, Wenyin
  • Ye, Bin

Abstract

The carbon trading scheme is a major institutional innovation for China to promote green and low-carbon economic development. This paper studies the relationship between the carbon market efficiency and enterprises' green technology innovations. First, we assess the efficiency of China's pilot carbon markets using the entropy-based TOPSIS model. Then, we adopt a continuous multi-period difference-in-differences model to explore the effects of carbon market efficiency on firms' green technological innovation. In addition, we analyze the heterogeneous effects of carbon market efficiency with regard to green patent types, industry types, and enterprise ownership. Finally, we examine how carbon market efficiency impacts firms' green innovation. We find that carbon market efficiency can increase enterprises' green patent applications, but the effect is limited. Carbon market efficiency has no discernible impact on green invention patents; it can only enhance green utility model patents. This phenomenon is more prominent in low-energy-consuming industries and private enterprises. We document that carbon market efficiency can enhance enterprises' R&D intensity and policy subsidies, thereby boosting green technology innovation. Our findings have important implications for improving the carbon market efficiency and firms' green technology innovation.

Suggested Citation

  • Wang, Dan & Sun, Mili & Meng, Bo & An, Yunbi & Cheng, Wenyin & Ye, Bin, 2024. "Can carbon market efficiency promote green technology innovation for Chinese companies?," Energy, Elsevier, vol. 309(C).
    • Handle: RePEc:eee:energy:v:309:y:2024:i:c:s0360544224029323
    DOI: 10.1016/j.energy.2024.133157
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0360544224029323
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.energy.2024.133157?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Yu, Song-min & Fan, Ying & Zhu, Lei & Eichhammer, Wolfgang, 2020. "Modeling the emission trading scheme from an agent-based perspective: System dynamics emerging from firms’ coordination among abatement options," European Journal of Operational Research, Elsevier, vol. 286(3), pages 1113-1128.
    2. Ibikunle, Gbenga & Gregoriou, Andros & Hoepner, Andreas G.F. & Rhodes, Mark, 2016. "Liquidity and market efficiency in the world's largest carbon market," The British Accounting Review, Elsevier, vol. 48(4), pages 431-447.
    3. Zhang, ZhongXiang, "undated". "China’s Carbon Market: Development, Evaluation, Coordination of Local and National Carbon Markets and Common Prosperity," FEEM Working Papers 328581, Fondazione Eni Enrico Mattei (FEEM).
    4. Bronwyn H. Hall & Dietmar Harhoff, 2012. "Recent Research on the Economics of Patents," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 541-565, July.
    5. Zhang, Wei & Li, Jing & Li, Guoxiang & Guo, Shucen, 2020. "Emission reduction effect and carbon market efficiency of carbon emissions trading policy in China," Energy, Elsevier, vol. 196(C).
    6. Oestreich, A. Marcel & Tsiakas, Ilias, 2015. "Carbon emissions and stock returns: Evidence from the EU Emissions Trading Scheme," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 294-308.
    7. Karen Palmer & Wallace E. Oates & Paul R. Portney & Karen Palmer & Wallace E. Oates & Paul R. Portney, 2004. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 3, pages 53-66, Edward Elgar Publishing.
    8. Jamasb, Tooraj & Pollitt, Michael G., 2015. "Why and how to subsidise energy R+D: Lessons from the collapse and recovery of electricity innovation in the UK," Energy Policy, Elsevier, vol. 83(C), pages 197-205.
    9. Tian Zhang & Shaohui Zou & Araz Darba, 2022. "Carbon Market Evaluation Based on Random Walk Hypothesis in China," Mathematical Problems in Engineering, Hindawi, vol. 2022, pages 1-11, July.
    10. Raphael Calel & Antoine Dechezleprêtre, 2016. "Environmental Policy and Directed Technological Change: Evidence from the European Carbon Market," The Review of Economics and Statistics, MIT Press, vol. 98(1), pages 173-191, March.
    11. Chen, Zhongfei & Zhang, Xiao & Chen, Fanglin, 2021. "Do carbon emission trading schemes stimulate green innovation in enterprises? Evidence from China," Technological Forecasting and Social Change, Elsevier, vol. 168(C).
    12. Cui, Jingbo & Wang, Chunhua & Zhang, Junjie & Zheng, Yang, 2021. "The effectiveness of China’s regional carbon market pilots in reducing firm emissions," LSE Research Online Documents on Economics 113492, London School of Economics and Political Science, LSE Library.
    13. Lin Ding & Zhenfeng Shao & Hanchao Zhang & Cong Xu & Dewen Wu, 2016. "A Comprehensive Evaluation of Urban Sustainable Development in China Based on the TOPSIS-Entropy Method," Sustainability, MDPI, vol. 8(8), pages 1-23, August.
    14. da Silva, Patricia Pereira & Moreno, Blanca & Figueiredo, Nuno Carvalho, 2016. "Firm-specific impacts of CO2 prices on the stock market value of the Spanish power industry," Energy Policy, Elsevier, vol. 94(C), pages 492-501.
    15. Flora, Maria & Vargiolu, Tiziano, 2020. "Price dynamics in the European Union Emissions Trading System and evaluation of its ability to boost emission-related investment decisions," European Journal of Operational Research, Elsevier, vol. 280(1), pages 383-394.
    16. Song, Xiang & Wang, Dingyu & Zhang, Xuantao & He, Yuan & Wang, Yong, 2022. "A comparison of the operation of China's carbon trading market and energy market and their spillover effects," Renewable and Sustainable Energy Reviews, Elsevier, vol. 168(C).
    17. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    18. Palao, Fernando & Pardo, Angel, 2012. "Assessing price clustering in European Carbon Markets," Applied Energy, Elsevier, vol. 92(C), pages 51-56.
    19. Chen, Yingqi & Ba, Shusong & Yang, Qing & Yuan, Tian & Zhao, Haibo & Zhou, Ming & Bartocci, Pietro & Fantozzi, Francesco, 2021. "Efficiency of China’s carbon market: A case study of Hubei pilot market," Energy, Elsevier, vol. 222(C).
    20. Zhou, Anhua & Xin, Ling & Li, Jun, 2022. "Assessing the impact of the carbon market on the improvement of China's energy and carbon emission performance," Energy, Elsevier, vol. 258(C).
    21. Michael E. Porter & Claas van der Linde, 1995. "Toward a New Conception of the Environment-Competitiveness Relationship," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 97-118, Fall.
    22. Haoqi Qian & Shaodan Xu & Jing Cao & Feizhou Ren & Wendong Wei & Jing Meng & Libo Wu, 2021. "Author Correction: Air pollution reduction and climate co-benefits in China’s industries," Nature Sustainability, Nature, vol. 4(2), pages 188-188, February.
    23. Chaobo Zhou & Yuankun Li & Zhengxin Sun, 2022. "Has the Carbon Trading Pilot Market Improved Enterprises’ Export Green-Sophistication in China?," Sustainability, MDPI, vol. 14(16), pages 1-18, August.
    24. Rogge, Karoline S. & Schneider, Malte & Hoffmann, Volker H., 2011. "The innovation impact of the EU Emission Trading System -- Findings of company case studies in the German power sector," Ecological Economics, Elsevier, vol. 70(3), pages 513-523, January.
    25. Zhang, Wei & Li, Guoxiang & Guo, Fanyong, 2022. "Does carbon emissions trading promote green technology innovation in China?," Applied Energy, Elsevier, vol. 315(C).
    26. Beat Hintermann, 2017. "Market Power in Emission Permit Markets: Theory and Evidence from the EU ETS," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(1), pages 89-112, January.
    27. Zhao, Xin-gang & Wu, Lei & Li, Ang, 2017. "Research on the efficiency of carbon trading market in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 79(C), pages 1-8.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Du, Pengcheng & Liu, Tianhao & Zhang, Dongdong & Du, Yu & Kong, Fannie & Huang, Chao & Zhao, Haisen & Goh, Hui Hwang, 2026. "Electricity–carbon coupling markets: mechanisms, models and digital enablers for low-carbon power system," Renewable and Sustainable Energy Reviews, Elsevier, vol. 230(C).
    2. Fu, Xuebao & Zhu, Qingyuan & Ma, Di & Wu, Liangpeng, 2026. "Impact of U.S. trade policy uncertainty on China’s energy transition via enterprise innovation efficiency," Energy, Elsevier, vol. 343(C).
    3. Ma, Zongguo & Ding, Chenhui & Wang, Xu & Huang, Qiaozhi, 2025. "Carbon emission reduction development, digital economy, and green transformation of China's manufacturing industry," International Review of Financial Analysis, Elsevier, vol. 102(C).
    4. Xuefei Zhao & Biyi Zhou & Qianling Zhou, 2025. "The Impact of Environmental Incentive Policies on the Value of New Energy Enterprises—Evidence from China’s New Energy Demonstration Cities," Sustainability, MDPI, vol. 17(19), pages 1-35, September.
    5. Yan, Leilei & Han, Wei, 2025. "The complexity of connection between green bonds and carbon markets: New evidence from China," Finance Research Letters, Elsevier, vol. 84(C).
    6. Jie Dou & Junyi Dou & Meng Qin & Chi-Wei Su, 2025. "Towards Sustainable Development: Assessing the Significance of World Uncertainty in Green Technology Innovation," Sustainability, MDPI, vol. 17(3), pages 1-20, February.
    7. Soto, Gonzalo H. & Martinez-Cobas, Xavier, 2025. "Does outward foreign direct investment and the green transition affect renewable energy penetration among European Union countries?," Renewable Energy, Elsevier, vol. 241(C).
    8. Shah, Syed Sumair & Murodova, Gulnora & Khan, Anwar, 2025. "Contribution of green bonds and green growth in clean energy capacity under the moderating role of political stability," Renewable Energy, Elsevier, vol. 246(C).
    9. Teng, Kuixiu & Meng, Shilong & Liu, Yunqi, 2025. "Can alternating irrigation technology drive water saving in agricultural irrigation? Evidence from China," Agricultural Water Management, Elsevier, vol. 320(C).
    10. Gonzalo H. Soto & Melchor Fernández Fernández & Xavier Martinez‑Cobas, 2025. "Vicious circle of the green transition: how green societies can perpetuate greenflation and how to mitigate it," Economic Change and Restructuring, Springer, vol. 58(6), pages 1-29, December.
    11. Yang, Guangyi & Tang, Chun & Liu, Xiaoxing, 2025. "The power of role models: A study on the efficiency connectedness of carbon markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 104(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wu, Yizhong & Liu, Xiaoxing & Tang, Chun, 2024. "Carbon Market and corporate financing behavior-From the perspective of constraints and demand," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 873-889.
    2. Ansaram, Karishma & Zakriya, Mohammed & Mazza, Paolo, 2026. "The race for carbon pricing among firms," International Review of Financial Analysis, Elsevier, vol. 109(C).
    3. Liu, Shimeng & Xiong, Xiong & Gao, Ya, 2025. "Market-based environmental regulations and green innovation: Evidence from the pilot carbon markets in China," Research in International Business and Finance, Elsevier, vol. 77(PA).
    4. Chang, Kai & Chen, Rongda & Chevallier, Julien, 2018. "Market fragmentation, liquidity measures and improvement perspectives from China's emissions trading scheme pilots," Energy Economics, Elsevier, vol. 75(C), pages 249-260.
    5. Zhang, Caiping & Liu, Falong & Wu, Dawei & Tan, Deming & Niu, Linping, 2025. "The impact of the carbon emissions trading scheme on corporate strategic deviance in China," Technological Forecasting and Social Change, Elsevier, vol. 212(C).
    6. Tabash, Mosab I. & Sheikh, Umaid A. & Selmi, Refk & Al-Faryan, Mamdouh Abdulaziz Saleh & Hammoudeh, Shawkat, 2025. "The asymmetric effects of European carbon emission trading system on European stock market returns: The moderating role of oil price uncertainty," International Review of Financial Analysis, Elsevier, vol. 104(PA).
    7. Zhang, Ying & Zhou, Xiaoyu & Xiong, Xiaoyan & Zhang, Ya-nan, 2026. "Does the carbon emission trading mitigate corporate overcapacity? Evidence from staggered difference-in-differences (DID) designs in China," International Review of Financial Analysis, Elsevier, vol. 109(C).
    8. Zhang, Xiaoliang & Zheng, Xiaojia, 2024. "Does carbon emission trading policy induce financialization of non-financial firms? Evidence from China," Energy Economics, Elsevier, vol. 131(C).
    9. Sun, Yanming & Shen, Simiao & Zhou, Chuanyu, 2023. "Does the pilot emissions trading system in China promote innovation? Evidence based on green technology innovation in the energy sector," Energy Economics, Elsevier, vol. 126(C).
    10. Wang, Xiao-Qing & Su, Chi-Wei & Lobonţ, Oana-Ramona & Li, Hao & Nicoleta-Claudia, Moldovan, 2022. "Is China's carbon trading market efficient? Evidence from emissions trading scheme pilots," Energy, Elsevier, vol. 245(C).
    11. Chen, Ming & Li, Zhongfei & Liu, Zhuang, 2024. "Substantive response or strategic response? The induced green innovation effects of carbon prices," International Review of Financial Analysis, Elsevier, vol. 93(C).
    12. Liu, Hongwei & Chen, Qiaoqiao & Song, Yanwu, 2025. "Does the carbon emissions trading scheme promote green technology innovation? New evidence from Chinese cities," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 1045-1057.
    13. Jin, Chenfei & Tsai, Fu-Sheng & Gu, Qiuyang & Wu, Bao, 2022. "Does the porter hypothesis work well in the emission trading schema pilot? Exploring moderating effects of institutional settings," Research in International Business and Finance, Elsevier, vol. 62(C).
    14. Friedrich, Marina & Mauer, Eva-Maria & Pahle, Michael & Tietjen, Oliver, 2020. "From fundamentals to financial assets: the evolution of understanding price formation in the EU ETS," EconStor Preprints 196150, ZBW - Leibniz Information Centre for Economics, revised 2020.
    15. Liu, Yunqiang & Liu, Sha & Shao, Xiaoyu & He, Yanqiu, 2022. "Policy spillover effect and action mechanism for environmental rights trading on green innovation: Evidence from China's carbon emissions trading policy," Renewable and Sustainable Energy Reviews, Elsevier, vol. 153(C).
    16. Liu, Lin & Liu, Liqun & Liu, Kai & Jiménez-Zarco, Ana Isabel, 2025. "Climate policy and corporate green transformation: Empirical evidence from carbon emission trading," Research in International Business and Finance, Elsevier, vol. 74(C).
    17. Li, Changsheng & Qi, Yaping & Liu, Shaohui & Wang, Xu, 2022. "Do carbon ETS pilots improve cities' green total factor productivity? Evidence from a quasi-natural experiment in China," Energy Economics, Elsevier, vol. 108(C).
    18. Tudi, Tayier & Deng, Xinghua & Chen, Lingqing & Ni, Mingjie, 2025. "Unraveling the nexus between emissions trading and corporate carbon outsourcing: Evidence from a quasi-natural experiment in China," Economic Analysis and Policy, Elsevier, vol. 88(C), pages 1612-1632.
    19. Ren, Shenggang & Hu, Yucai & Zheng, Jingjing & Wang, Yangjie, 2020. "Emissions trading and firm innovation: Evidence from a natural experiment in China," Technological Forecasting and Social Change, Elsevier, vol. 155(C).
    20. aus dem Moore, Nils & Brehm, Johannes & Gruhl, Henri, 2025. "Driving innovation? Carbon tax effects in the Swedish transport sector," Journal of Public Economics, Elsevier, vol. 248(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:energy:v:309:y:2024:i:c:s0360544224029323. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.