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The spatial spillover effect of carbon emission trading scheme on green innovation in China’s cities

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  • Jingru Xu

    (Tianjin University)

  • Xiangjing Tong

    (Tianjin University)

  • Baochen Yang

    (Tianjin University)

Abstract

The interactive behaviors, such as competition and learning between local and neighboring cities, can lead to spatial spillover effects in policy implementation. Estimating the direct, indirect, and total effects of the carbon emission trading scheme (CETS) on green innovation is crucial to clarify its role and mechanisms. This paper applies the spatial difference-in-differences model to estimate these effects using data from 278 cities in China from 2009 to 2019. The results demonstrate that the CETS implementation catalyzes green innovation in pilot cities, which supports the Porter hypothesis. However, it has a negative impact on green innovation in neighboring cities of pilot cities, with this negative impact diminishing as distance increases. Notably, the total effect of the CETS is significantly negative, indicating that the CETS’s average impact on green innovation in all cities is negative. Mechanism analysis reveals that the direct and indirect effects of the CETS on green innovation are strengthened in cities with higher levels of financial development, lower financial pressure, and easier economic growth targets. Notably, in cities with high-level industrial structures, the CETS not only enhances its contribution to green innovation but also mitigates its negative impact on neighboring cities. Furthermore, this paper explores the heterogeneous effects of the CETS from the perspective of its implementation measures.

Suggested Citation

  • Jingru Xu & Xiangjing Tong & Baochen Yang, 2024. "The spatial spillover effect of carbon emission trading scheme on green innovation in China’s cities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 73(2), pages 639-669, August.
    • Handle: RePEc:spr:anresc:v:73:y:2024:i:2:d:10.1007_s00168-024-01285-y
    DOI: 10.1007/s00168-024-01285-y
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    Cited by:

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    2. Wang, Shucui & Peng, Ting & Du, Anna Min & Lin, Xiaohui, 2025. "The impact of the digital economy on rural industrial revitalization," Research in International Business and Finance, Elsevier, vol. 76(C).

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    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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