IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v54y2023ics1544612323000697.html

Carbon emission trading policy and firm's environmental investment

Author

Listed:
  • Yang, Shengyi

Abstract

This paper evaluates the effect of carbon emission trading policy on firm's environmental investment based on the Difference-in-Differences method. The result shows that the establishment of a carbon emission trading system imposes a negative effect on corporate environmental investment. Furthermore, our findings reveal that the reduction in environmental investment arising from carbon emission trading policy is particularly pronounced in non-state-owned enterprises and mature enterprises with large-size. The analysis of potential mechanisms implies that productive investment crowds out the green investment due to the carbon emission regulation. Overall, this study is conducive to the current environmental policy debates by informing policymakers about the implications of investment decision-making behavior of microcosmic enterprises in response to the carbon emission trading policy.

Suggested Citation

  • Yang, Shengyi, 2023. "Carbon emission trading policy and firm's environmental investment," Finance Research Letters, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323000697
    DOI: 10.1016/j.frl.2023.103695
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612323000697
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2023.103695?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. Thomas Broberg & Per-Olov Marklund & Eva Samakovlis & Henrik Hammar, 2013. "Testing the Porter hypothesis: the effects of environmental investments on efficiency in Swedish industry," Journal of Productivity Analysis, Springer, vol. 40(1), pages 43-56, August.
    2. Paul Lanoie & Michel Patry & Richard Lajeunesse, 2008. "Environmental regulation and productivity: testing the porter hypothesis," Journal of Productivity Analysis, Springer, vol. 30(2), pages 121-128, October.
    3. Earnhart, Dietrich & Lizal, Lubomir, 2006. "Effects of ownership and financial performance on corporate environmental performance," Journal of Comparative Economics, Elsevier, vol. 34(1), pages 111-129, March.
    4. Wang, Yan & Shen, Neng, 2016. "Environmental regulation and environmental productivity: The case of China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 62(C), pages 758-766.
    5. Paul Lanoie & Jérémy Laurent‐Lucchetti & Nick Johnstone & Stefan Ambec, 2011. "Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(3), pages 803-842, September.
    6. Sueyoshi, Toshiyuki & Goto, Mika, 2009. "Can environmental investment and expenditure enhance financial performance of US electric utility firms under the clean air act amendment of 1990?," Energy Policy, Elsevier, vol. 37(11), pages 4819-4826, November.
    7. repec:bla:jindec:v:46:y:1998:i:2:p:235-56 is not listed on IDEAS
    8. Dongmin Kong & Ling Zhu, 2022. "Governments’ Fiscal Squeeze and Firms’ Pollution Emissions: Evidence from a Natural Experiment in China," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 81(4), pages 833-866, April.
    9. Joseph D. Piotroski & T.J. Wong, 2012. "Institutions and Information Environment of Chinese Listed Firms," NBER Chapters, in: Capitalizing China, pages 201-242, National Bureau of Economic Research, Inc.
    10. Zhang, Qi & Yu, Zhi & Kong, Dongmin, 2019. "The real effect of legal institutions: Environmental courts and firm environmental protection expenditure," Journal of Environmental Economics and Management, Elsevier, vol. 98(C).
    11. Leiter, Andrea M. & Parolini, Arno & Winner, Hannes, 2011. "Environmental regulation and investment: Evidence from European industry data," Ecological Economics, Elsevier, vol. 70(4), pages 759-770, February.
    12. Wayne B. Gray & Ronald J. Shadbegian, 1998. "Environmental Regulation, Investment Timing, and Technology Choice," Journal of Industrial Economics, Wiley Blackwell, vol. 46(2), pages 235-256, June.
    13. Yuquing Xing & Charles Kolstad, 2002. "Do Lax Environmental Regulations Attract Foreign Investment?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 21(1), pages 1-22, January.
    Full references (including those not matched with items on IDEAS)

    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. Chiara Franco & Giovanni Marin, 2017. "The Effect of Within-Sector, Upstream and Downstream Environmental Taxes on Innovation and Productivity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(2), pages 261-291, February.
    2. Yi Li & Lili Ding & Yongliang Yang, 2020. "Can the Introduction of an Environmental Target Assessment Policy Improve the TFP of Textile Enterprises? A Quasi-Natural Experiment Based on the Huai River Basin in China," Sustainability, MDPI, vol. 12(4), pages 1-19, February.
    3. Jun Shen & Meng Xu & Xiuli Liu & Yuechao Zhao, 2025. "Active adaptation or short-run profit pursuing? Carbon emissions trading and corporate financialization: evidence from Chinese listed companies," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(10), pages 25255-25272, October.
    4. Franco, Chiara & Marin, Giovanni, 2013. "The Effect of Within-Sector, Upstream and Downstream Energy Taxes on Innovation and Productivity," Energy: Resources and Markets 162419, Fondazione Eni Enrico Mattei (FEEM).
    5. Lorena D’Agostino, 2015. "How MNEs respond to environmental regulation: integrating the Porter hypothesis and the pollution haven hypothesis," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 32(2), pages 245-269, August.
    6. Johan Brolund & Robert Lundmark, 2017. "Effect of Environmental Regulation Stringency on the Pulp and Paper Industry," Sustainability, MDPI, vol. 9(12), pages 1-16, December.
    7. Zhice Cheng & Xinyuan Chen & Huwei Wen, 2022. "How Does Environmental Protection Tax Affect Corporate Environmental Investment? Evidence from Chinese Listed Enterprises," Sustainability, MDPI, vol. 14(5), pages 1-22, March.
    8. Kerui Du & Qilin Huang & Presley K. Wesseh, 2025. "Domestic Pollution Havens: Linking Interregional Capital Flight and Water Pollution Regulation in China," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 88(1), pages 125-161, January.
    9. Nikos Chatzistamoulou & Kostas Kounetas, 2023. "Tracing green growth through industrial resource efficiency patterns: The role of competitiveness and clean technologies," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(7), pages 4011-4026, October.
    10. Yu Hao & Yunxia Guo & Haitao Wu, 2022. "The role of information and communication technology on green total factor energy efficiency: Does environmental regulation work?," Business Strategy and the Environment, Wiley Blackwell, vol. 31(1), pages 403-424, January.
    11. Xiaoning Zhang & Mei Qu, 2020. "Impact of Environmental Regulation on Scientific and Technological Competitiveness of Resource-Based Cities in China—Based on Panel Data of 33 Resource-Based Cities," IJERPH, MDPI, vol. 17(24), pages 1-16, December.
    12. Bu, Maoliang & Qiao, Zhenzi & Liu, Beibei, 2020. "Voluntary environmental regulation and firm innovation in China," Economic Modelling, Elsevier, vol. 89(C), pages 10-18.
    13. Kneller, Richard & Manderson, Edward, 2012. "Environmental regulations and innovation activity in UK manufacturing industries," Resource and Energy Economics, Elsevier, vol. 34(2), pages 211-235.
    14. Seulgi Yoo & Almas Heshmati, 2019. "The Effects of Environmental Regulations on the Manufacturing Industry’s Performance: A Comparison of Green and Non-Green Sectors in Korea," Energies, MDPI, vol. 12(12), pages 1-14, June.
    15. Manli Cheng & Zhen Shao & Changhui Yang & Xiaoan Tang, 2019. "Analysis of Coordinated Development of Energy and Environment in China’s Manufacturing Industry under Environmental Regulation: A Comparative Study of Sub-Industries," Sustainability, MDPI, vol. 11(22), pages 1-20, November.
    16. Yuping Deng & Yanrui Wu & Helian Xu, 2020. "Political Connections and Firm Pollution Behaviour: An Empirical Study," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(4), pages 867-898, April.
    17. Lorena M. D'Agostino & Rosina Moreno, 2019. "Green regions and local firms' innovation," Papers in Regional Science, Wiley Blackwell, vol. 98(4), pages 1585-1608, August.
    18. Peng, Jiaying & Xie, Rui & Ma, Chunbo & Fu, Yang, 2021. "Market-based environmental regulation and total factor productivity: Evidence from Chinese enterprises," Economic Modelling, Elsevier, vol. 95(C), pages 394-407.
    19. Chen, Wenrui & Cao, Yue & Dong, Yizhe & Ma, Diandian, 2025. "Environmental regulations and corporate cash holdings," The British Accounting Review, Elsevier, vol. 57(5).
    20. Teemu Makkonen & Sari Repka, 2016. "The innovation inducement impact of environmental regulations on maritime transport: a literature review," International Journal of Innovation and Sustainable Development, Inderscience Enterprises Ltd, vol. 10(1), pages 69-86.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

    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:finlet:v:54:y:2023:i:c:s1544612323000697. 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.elsevier.com/locate/frl .

    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.