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Is China's carbon neutrality commitment truly credible? Evidence from a natural experiment

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  • Gao, Wen
  • Wang, Maobin
  • Ye, Tao

Abstract

The credibility of China's carbon neutrality commitment is an interesting and controversial topic. We investigate this issue using an exogenous policy experiment in 2021, in which the Chinese government surprisingly accelerated the pace of action to meet its pledge. We find that domestic investors perceive China's carbon emission commitment as credible by responding sharply to the possible enhanced energy control policies in China due to its pledge. Our evidence also suggests that investors’ concerns regarding escalating policies drive their reactions. Our evidence contributes to the discussion on perceived credibility and investor reactions to policy announcements.

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  • Gao, Wen & Wang, Maobin & Ye, Tao, 2022. "Is China's carbon neutrality commitment truly credible? Evidence from a natural experiment," Finance Research Letters, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finlet:v:50:y:2022:i:c:s154461232200469x
    DOI: 10.1016/j.frl.2022.103284
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    References listed on IDEAS

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    1. Pevzner, Mikhail & Xie, Fei & Xin, Xiangang, 2015. "When firms talk, do investors listen? The role of trust in stock market reactions to corporate earnings announcements," Journal of Financial Economics, Elsevier, vol. 117(1), pages 190-223.
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    3. Zhang, Wei & Li, Jing & Li, Guoxiang & Guo, Shucen, 2020. "Emission reduction effect and carbon market efficiency of carbon emissions trading policy in China," Energy, Elsevier, vol. 196(C).
    4. Shahbaz, Muhammad & Kablan, Sandrine & Hammoudeh, Shawkat & Nasir, Muhammad Ali & Kontoleon, Andreas, 2020. "Environmental Implications of Increased US Oil Production and Liberal Growth Agenda in Post -Paris Agreement Era," MPRA Paper 99277, University Library of Munich, Germany, revised 19 Mar 2020.
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    Cited by:

    1. Yu, Qing & Hui, Eddie C.M. & Shen, Jianfu, 2024. "Are state-owned enterprises more responsible for carbon neutrality? Evidence from stock market reactions to China’s commitment to carbon neutrality," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 96(C).
    2. Sadiq, Muhammad & Paramaiah, Ch & joseph, Robinson & Dong, Ziguang & Nawaz, Muhammad Atif & Shukurullaevich, Nizomjon Khajimuratov, 2024. "Role of fintech, green finance, and natural resource rents in sustainable climate change in China. Mediating role of environmental regulations and government interventions in the pre-post COVID eras," Resources Policy, Elsevier, vol. 88(C).
    3. Xu, Jie & Chen, Fu & Zhang, Weiwei & Liu, Yiting & Li, Tingting, 2023. "Analysis of the carbon emission reduction effect of Fintech and the transmission channel of green finance," Finance Research Letters, Elsevier, vol. 56(C).

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