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Does the Carbon Emission Trading Pilot Policy Enhance Carbon Reduction Efficiency?

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  • Yin Wang

    (Business College, Yangzhou University, Yangzhou 225127, China)

  • Wanzong Wu

    (Business College, Yangzhou University, Yangzhou 225127, China)

Abstract

The creative breakthroughs in policy implementation by China hold essential practical importance for promoting global sustainability. The carbon emission trading (CET) pilot policy initiated in 2011 provides a quasi-natural experimental setting to investigate the dual impacts of market-incentivized environmental regulation on corporate carbon emissions (CEs) and capacity utilization (CU) enhancement. This study employs panel data from A-share listed manufacturing companies on the Shanghai and Shenzhen stock exchanges spanning 2007–2022, constructing a corporate carbon reduction efficiency (CRE). A Generalized difference-in-differences (DID) approach is adopted to examine the policy effects. The study reveals that the execution of the CET pilot policy has shown a notable and enduring enhancement in corporate CRE, yielding the combined advantage of advancing corporate decarbonization and improving CU. These conclusions remain resilient despite thorough sensitivity analysis. Furthermore, the pilot improves CRE via three principal avenues: augmenting corporate innovation capabilities, increasing green investment intensity, and refining managerial practices. The impacts of CET pilots are most significant in state-owned firms (SOEs), capital-intensive industries (CIEs), eastern region enterprises (EEs), and sectors with little market concentration. The findings set essential empirical standards for assessing decarbonization initiatives and guiding social progress towards sustainability.

Suggested Citation

  • Yin Wang & Wanzong Wu, 2025. "Does the Carbon Emission Trading Pilot Policy Enhance Carbon Reduction Efficiency?," Sustainability, MDPI, vol. 17(11), pages 1-21, June.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:11:p:5076-:d:1669869
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