How does China’s carbon emissions trading policy affect green technology innovation? Evidence from enterprises in carbon-covered industries

Using panel data on China’s carbon-covered listed enterprises, this study employs the Poisson pseudo-maximum likelihood with high-dimensional fixed effects (PPMLHDFE) approach to investigate the impact of the carbon emissions trading (CET) policy on firms’ green technology innovation. A novel categorization is proposed to classify the enterprises in carbon-covered industries into CET-included and non-CET-included groups. Results show that China’s CET policy plays a vital role in green technology innovation, with a stronger positive effect on CET-included enterprises. Furthermore, heterogeneity exists among eight carbon-covered industries. The green technology innovation of enterprises in the power and petrochemical industries, particularly the CET-included ones, is stimulated by the CET policy. However, it inhibits green technology innovation in the aviation and chemical industries and plays no role in other industries. Additionally, the effect exhibits heterogeneity across pilot areas. It is positive in Hubei and Tianjin, negative in Chongqing and Shanghai, and ineffective in Beijing, Guangdong, and Shenzhen. Finally, the effect of the CET policy on green technology innovation is stronger for state-owned enterprises than for non-state-owned ones.