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The impact of carbon emission trading policy on firms’ green innovation in China

Author

Listed:
  • Hongxin Yu

    (Shanghai Business School)

  • Yaohui Jiang

    (Shanghai University of Finance and Economics)

  • Zhaowen Zhang

    (Shanghai University of Finance and Economics)

  • Wen-Long Shang

    (Beijing University of Technology
    Beijing Jiaotong University
    Imperial College London)

  • Chunjia Han

    (Birkbeck, University of London)

  • Yuanjun Zhao

    (Nanjing Audit University)

Abstract

This study aims to examine the green innovation effect of the carbon emissions pilot policy in China. First, using the difference-in-differences method and regressions of instrumental variables using the data from Chinese listed firms, we verify that the policy promotes green innovation among regulated firms and is more pronounced among state-owned enterprises, firms in the eastern region, and those with lower financing constraints. Furthermore, this positive effect spreads downstream relative to the regulated firms through input–output linkages, but reduces green innovation to upstream firms. Accordingly, such diffusion of innovation is achieved through the price mechanism. The results necessitate the introduction of various derivatives to mobilize the market to reduce the speculative volatility of carbon prices. In addition, relevant supporting policies must be established to encourage corporate innovation to reduce the crowding-out effect owing to emission reduction and the nonmarket factors.

Suggested Citation

  • Hongxin Yu & Yaohui Jiang & Zhaowen Zhang & Wen-Long Shang & Chunjia Han & Yuanjun Zhao, 2022. "The impact of carbon emission trading policy on firms’ green innovation in China," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-24, December.
    • Handle: RePEc:spr:fininn:v:8:y:2022:i:1:d:10.1186_s40854-022-00359-0
    DOI: 10.1186/s40854-022-00359-0
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    2. Han Long & Gen‐Fu Feng & Qiang Gong & Chun‐Ping Chang, 2023. "ESG performance and green innovation: An investigation based on quantile regression," Business Strategy and the Environment, Wiley Blackwell, vol. 32(7), pages 5102-5118, November.
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    5. Dong Xue & Tongyang Liu & Xiaomin Li & Xiaolei Zhao, 2023. "Can the Digital Economy Accelerate “Carbon Neutrality”?—An Empirical Analysis Based on Provincial Data in China," Sustainability, MDPI, vol. 15(14), pages 1-26, July.
    6. Ziyuan Sun & Xiao Sun & Yuting Dong, 2024. "Does negative environmental performance feedback induce substantive green innovation? The moderating roles of external regulations and internal incentive," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(4), pages 2953-2976, July.
    7. Carlos Antônio Rufino Júnior & Eleonora Riva Sanseverino & Pierluigi Gallo & Murilo Machado Amaral & Daniel Koch & Yash Kotak & Sergej Diel & Gero Walter & Hans-Georg Schweiger & Hudson Zanin, 2024. "Unraveling the Degradation Mechanisms of Lithium-Ion Batteries," Energies, MDPI, vol. 17(14), pages 1-52, July.
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    9. Wang, Bo & Gong, Siyu & Yang, Yang, 2024. "Unveiling the relation between digital technology and low-carbon innovation: Carbon emission trading policy as an antecedent," Technological Forecasting and Social Change, Elsevier, vol. 205(C).

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