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Carbon Pricing Induces Innovation: Evidence from China's Regional Carbon Market Pilots

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  • Jingbo Cui
  • Junjie Zhang
  • Yang Zheng

Abstract

China has launched seven regional pilots of emission trading scheme (ETS) to limit its carbon emissions. Taking advantage of the variations in the regional ETS pilots across regions and sectors and over time, we employ a difference-in-difference-in-differences (DDD) approach to evaluate the effect of ETS on low-carbon innovation at the firm level. Using patent application data of publicly-listed firms in China between 2003 and 2015, we find that the ETS pilots induced innovation in low-carbon technologies. The more active pilots—measured by carbon price and turnover rate of allowance trading—are associated with more intense low-carbon innovation.

Suggested Citation

  • Jingbo Cui & Junjie Zhang & Yang Zheng, 2018. "Carbon Pricing Induces Innovation: Evidence from China's Regional Carbon Market Pilots," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 453-457, May.
    • Handle: RePEc:aea:apandp:v:108:y:2018:p:453-57
    Note: DOI: 10.1257/pandp.20181027
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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