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Heterogeneous impacts of carbon emission trading on green innovation: Firm-level in China

Author

Listed:
  • Haotian Zhang
  • Xiumei Sun
  • Mahmood Ahmad
  • Xueyang Wang

Abstract

As an important market-based environmental policy, carbon emissions trading has played an increasingly important role in promoting energy conservation, emission reduction, and green innovation. The Chinese government started to implement a Carbon Emission Trade scheme in 2013 successively. This study uses a multi-period difference in difference to investigate the impact of Carbon Emission Trade on green innovation in panel data of listed companies from 2008 to 2020. The results show that: (1) Carbon Emission Trade significantly improves green innovation by 0.1916%. The robust test verifies the results. (2) The impact of Carbon Emission Trade on green innovation is heterogeneous at regional, industrial, and firm levels. From the regional level, Carbon Emission Trade has a stronger effect on regions with high marketization and low emissions. From the industry level, the policy effects are more pronounced in technology-intensive industries and the power industry, and negative policy effects are generated in Chemical industry, steel, and paper industries. From the enterprise level, Carbon Emission Trade shows better policy effects in state-owned enterprises, large enterprises. (3) Carbon Emission Trade enhances green innovation by reducing corporate financing constraints, improving corporate human capital, and strengthening government. (4) The enhancement of green innovation by Carbon Emission Trade balances the benefits. Increasing carbon price, market size and activity inhibit the increase of Carbon Emission Trade on green innovation. Based on the findings, the paper provides a new reference for the establishment of a carbon market.

Suggested Citation

  • Haotian Zhang & Xiumei Sun & Mahmood Ahmad & Xueyang Wang, 2024. "Heterogeneous impacts of carbon emission trading on green innovation: Firm-level in China," Energy & Environment, , vol. 35(7), pages 3504-3529, November.
    • Handle: RePEc:sae:engenv:v:35:y:2024:i:7:p:3504-3529
    DOI: 10.1177/0958305X231164690
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    Cited by:

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    2. Shiheng Xie & Pengbo Zhao & Shuping Wang, 2025. "How Does the Carbon Emission Trading Policy Enhance Corporate Green Technology Innovation? Evidence from Advanced Manufacturing Enterprises," Sustainability, MDPI, vol. 17(18), pages 1-21, September.
    3. Shi, Yarong & Yang, Bo, 2025. "China's energy system building toward an era of resilience: How green fintech can empower?," International Review of Economics & Finance, Elsevier, vol. 98(C).
    4. Qidi Wang & Jinyan Zhan & Hailin Zhang & Yuhan Cao & Zheng Yang & Quanlong Wu & Ali Raza Otho, 2025. "China’s Carbon Emissions Trading Market: Current Situation, Impact Assessment, Challenges, and Suggestions," Land, MDPI, vol. 14(8), pages 1-27, August.
    5. Xu, Yang & Dong, Chen & Zhang, Bowei & Gong, Mingyue & Wang, Xingyu, 2025. "The synergistic effect of carbon trading and green credit on manufacturing enterprises' production decisions and sustainability performance," International Review of Economics & Finance, Elsevier, vol. 103(C).
    6. Yanrong Sun & Xinye Wang & Lan Feng & Jiming Li, 2025. "Can the Development of Digital Inclusive Finance Curb Carbon Emissions?: A Spatial Panel Analysis for China Under the PVAR Approach," Sustainability, MDPI, vol. 17(6), pages 1-19, March.
    7. Zhang, Wei & Li, Chengjiang & Jia, Tingwen & Wang, Shiyuan & Hao, Qianwen & Yang, Jing, 2025. "Evolutionary game analysis of sustainable aviation fuel promotion," Energy, Elsevier, vol. 322(C).

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