Unintended consequences of carbon regulation on the performance of SOEs in China: The role of technical efficiency

The change in the level of operating performance of state-owned enterprises (SOEs) under the constraint of climate policies is directly related to the success or failure of subsequent low-carbon development. In this study, taking the Low-carbon Pilot Program introduced in 2010 by the central government as an exogenous natural experiment, we investigate the impact of carbon regulation on the operating performance of SOEs by using the difference-in-differences (DID) strategy for the first time. We conduct a series of robustness tests on the estimated results, including a placebo test by changing the control group, a parallel trend test by advancing the introduction time of the policy, and an interference elimination of the self-selection bias by using the propensity score matching (PSM) method. Furthermore, we examine the heterogeneous effects with regard to carbon intensity reduction targets. Finally, we use the heterogeneous stochastic frontier analysis method to measure the technical efficiency and analyze the influential mechanism of carbon regulation on the performance of SOEs. The results show that the carbon regulation policy significantly reduces the operating performance of SOEs. Through a series of robustness tests, we find that this conclusion is reliable. The higher the carbon intensity reduction target set by the central government is, the greater the negative impact of the carbon regulation policy on the performance of SOEs will be. Under the constraints of climate policies, SOEs acquire additional credit resources and launch a great quantity of inefficient investment. These actions inhibit the improvement of firms' technical efficiency and reduce the operating performance of SOEs. Therefore, the central government should strive to promote R&D activities related to low-carbon technology and improve the technical efficiency of SOEs when introducing any low-carbon policy.