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Does the National Carbon Emissions Trading Market Promote Corporate Environmental Protection Investment? Evidence from China

Author

Listed:
  • Xiao Yang

    (School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China)

  • Wen Jia

    (School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China)

  • Kedan Wang

    (School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China)

  • Geng Peng

    (School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China)

Abstract

China launched the National Carbon Emissions Trading Market (NCETM) in July 2021, heralding the first nationwide implementation of carbon emissions trading since the 2011 pilot scheme in China. The NCETM serves as a vital policy instrument that employs market mechanisms to regulate and mitigate greenhouse gas emissions. Thus, this study aims to examine how the NCETM in China, as an environmental regulatory policy, impacts environmental protection investment (EPI) made by enterprises. Specifically, the research seeks to address three key questions: (1) Does the NCETM have an impact on corporate EPI? (2) What are the mechanisms underlying the effect of the NCETM on corporate EPI? (3) Additionally, does the impact of the NCETM on corporate EPI vary with the location of the firms? By utilizing financial data from listed firms from 2018 to 2022 and employing the difference-in-differences (DID) model, the empirical results suggest that: (1) NCETM significantly stimulates the increase in EPI by firms. (2) The NCETM promotes environmental investment by inducing higher R&D expenditures. (3) The effects of NCETM on firms’ EPI vary across regions, with the policy only being effective for firms in non-pilot regions that did not engage in the carbon emissions trading market prior to NCETM. This study provides empirical evidence for the microeconomic effects of the NCETM and a useful reference for the implementation of carbon emissions trading policies.

Suggested Citation

  • Xiao Yang & Wen Jia & Kedan Wang & Geng Peng, 2024. "Does the National Carbon Emissions Trading Market Promote Corporate Environmental Protection Investment? Evidence from China," Sustainability, MDPI, vol. 16(1), pages 1-22, January.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:1:p:402-:d:1312095
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