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Towards green progress: an empirical analysis of the Chinese emission trading pilot schemes and technological innovations

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Listed:
  • Ruijie Tian

    (Novo Nordisk)

  • Li Chen

    (Tongji University
    University of Gothenburg)

  • Xiaojun Yang

    (Xi’an Jiaotong University)

Abstract

This paper examines the impact of the carbon emissions trading scheme (ETS) on directed technological change in the context of Chinese pilot schemes. We focus on firms’ heterogeneity in driving innovation and explore policy variations across pilots. Using a matched difference-in-differences design with a zero-inflated Poisson model, we find that the low-carbon innovation is driven by firms at the intensive margin. On average, a firm files 0.16 additional low-carbon patents annually at the intensive margin. In addition, when looking across pilots, the effect on low-carbon innovation is significant in two pilots, Beijing and Shanghai. We further find that, when looking at firms with different productivity levels measured by output per worker, the pilot ETS encourages low-carbon innovation at the intensive margin but reduces entry into low-carbon innovation at the extensive margin for the more productive firms. Our results suggest that innovation inertia matters, and future policies should encourage smaller firms covered by ETS to start innovation in low-carbon technologies.

Suggested Citation

  • Ruijie Tian & Li Chen & Xiaojun Yang, 2025. "Towards green progress: an empirical analysis of the Chinese emission trading pilot schemes and technological innovations," Review of Economic Design, Springer;Society for Economic Design, vol. 29(4), pages 727-765, December.
    • Handle: RePEc:spr:reecde:v:29:y:2025:i:4:d:10.1007_s10058-024-00372-y
    DOI: 10.1007/s10058-024-00372-y
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    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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