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The Carbon Emissions Trading Scheme and Corporate Environmental Investments: A Quasi-natural Experiment from China

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  • Lirong Chen
  • Siyi Liu
  • Xin Liu
  • Jiani Wang

Abstract

This study examines the relationship between the carbon emissions trading scheme (ETS) and corporate environmental investments. Using a panel data set of Chinese listed firms from 2010 to 2018, we find that the ETS implementation leads to a significant increase in corporate environmental investments. Furthermore, our path analysis shows that the ETS can help improve corporate environmental and financial performance through its impact on environmental investments. Finally, we find that the positive effect of the ETS is more pronounced for firms participating in carbon markets with higher liquidity, for firms facing higher regulatory pressure, and for those that are less able to pass through emissions costs to customers. Overall, the results provide evidence on the effectiveness of China’s ETS in driving environmental investments.

Suggested Citation

  • Lirong Chen & Siyi Liu & Xin Liu & Jiani Wang, 2022. "The Carbon Emissions Trading Scheme and Corporate Environmental Investments: A Quasi-natural Experiment from China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(9), pages 2670-2681, July.
    • Handle: RePEc:mes:emfitr:v:58:y:2022:i:9:p:2670-2681
    DOI: 10.1080/1540496X.2021.2009338
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    Cited by:

    1. Xiaoqi Li & Dingfei Guo & Chao Feng, 2022. "The Carbon Emissions Trading Policy of China: Does It Really Promote the Enterprises’ Green Technology Innovations?," IJERPH, MDPI, vol. 19(21), pages 1-15, November.
    2. Xihui Chen & Juan Ou & Xuemei Tang & Qinghe Yang, 2023. "The Impact of Officials’ Off-Office Accountability Audit of Natural Resource Assets on Firms’ Green Innovation Strategies: A Quasi-Natural Experiment in China," Sustainability, MDPI, vol. 15(3), pages 1-36, February.
    3. Wu, Yizhong & Liu, Xiaoxing & Tang, Chun, 2024. "Carbon Market and corporate financing behavior-From the perspective of constraints and demand," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 873-889.
    4. Yu, Jian & Liu, Peng & Fu, Dahai & Shi, Xunpeng, 2023. "How do power shortages affect CO2 emission intensity? Firm-level evidence from China," Energy, Elsevier, vol. 282(C).

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