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Carbon emission trading policy and firm's environmental investment

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  • 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
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    Cited by:

    1. Xing, Lu & Han, DongHao & Hui, Xie, 2023. "The impact of carbon policy on corporate risk-taking with a double/debiased machine learning based difference-in-differences approach," Finance Research Letters, Elsevier, vol. 58(PC).
    2. Alexander, Anna & De Vito, Antonio & Menicacci, Luca, 2024. "At what cost? Environmental regulation and corporate cash holdings," Finance Research Letters, Elsevier, vol. 61(C).
    3. Purcel, Alexandra-Anca, 2023. "Environmental protection expenditures and EU ETS: Evidence from Romania," Finance Research Letters, Elsevier, vol. 58(PB).
    4. Long, Wenbin & Qu, Xin & Yin, Saifeng, 2023. "How does carbon emissions trading policy affect accrued earnings management in corporations? Evidence from China," Finance Research Letters, Elsevier, vol. 55(PA).
    5. Ge, Tao & Hao, Zixuan & Chen, Yuan & Chen, Zhanbo, 2024. "Energy intensity constraints and corporate investment strategies: Evidence from Chinese listed enterprises," Finance Research Letters, Elsevier, vol. 64(C).
    6. Ying Li & Changgeng Zhu, 2023. "The Impact of Carbon Emissions Trading on the High Quality Development of Manufacturing Industry - The Evidence from China," Climate Economics and Finance, Anser Press, vol. 1(1), pages 29-44, November.
    7. Zhong, Tingyong & Ma, Fuqi & Sun, Fangcheng & Li, Jiangna, 2024. "Can green finance reduce corporate carbon risk?," Finance Research Letters, Elsevier, vol. 63(C).
    8. Zhao, Xiaomeng & Chen, Yinna & Si, Deng-Kui & Jiang, Cun-Yuan, 2024. "How does environmental legislation affect enterprise investment preferences? A quasi-natural experiment based on China's new environmental protection law," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 834-855.
    9. He, Yixiong & Zhang, Fengxuan & Wang, Yanwei, 2023. "How to facilitate efficient blue carbon trading? A simulation study using the game theory to find the optimal strategy for each participant," Energy, Elsevier, vol. 276(C).
    10. Wei, Xiahai & Jiang, Feng & Chen, Yu & Hua, Wenhui, 2024. "Towards green development: The role of intelligent manufacturing in promoting corporate environmental performance," Energy Economics, Elsevier, vol. 131(C).

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    More about this item

    Keywords

    Carbon emission trading policy; Corporate environmental investment; Productive investment; China;
    All these 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

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