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Carbon Border Adjustment Mechanism as a Catalyst for Greenfield Investment: Evidence from Chinese Listed Firms Using a Difference-in-Differences Model

Author

Listed:
  • Jiayi Liu

    (School of Finance and Economics, Jiangsu University, Zhenjiang 212000, China)

  • Weidong Wang

    (School of Finance and Economics, Jiangsu University, Zhenjiang 212000, China)

  • Tengfei Jiang

    (School of Finance and Economics, Jiangsu University, Zhenjiang 212000, China)

  • Huirong Ben

    (School of Finance and Economics, Jiangsu University, Zhenjiang 212000, China)

  • Jie Dai

    (School of Finance and Economics, Jiangsu University, Zhenjiang 212000, China)

Abstract

Research on the EU’s Carbon Border Adjustment Mechanism (CBAM) has predominantly examined its implications for climate governance and export trade yet overlooked how enterprises adapt their foreign investment strategies. Using panel data from Chinese listed companies between 2011 and 2022, this study employs the CBAM as a quasi-natural experiment and applies a difference-in-differences (DID) model for analysis. Our findings indicate that the CBAM has a significant positive impact on outward greenfield investments, as robustly validated through a series of rigorous robustness checks. Mechanism analysis reveals two operational channels: trade restructuring effect (reduced export shares) and innovation-driven demand effect (enhanced R&D intensity). Heterogeneity tests further indicate more substantial CBAM responsiveness among eastern coastal firms, non-state-owned enterprises, and those pursuing horizontal production-oriented expansions. This study contributes to the literature on CBAM’s effects and offers practical recommendations for enterprises to mitigate CBAM’s impact via greenfield investments.

Suggested Citation

  • Jiayi Liu & Weidong Wang & Tengfei Jiang & Huirong Ben & Jie Dai, 2025. "Carbon Border Adjustment Mechanism as a Catalyst for Greenfield Investment: Evidence from Chinese Listed Firms Using a Difference-in-Differences Model," Sustainability, MDPI, vol. 17(8), pages 1-21, April.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:8:p:3492-:d:1634194
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