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

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.

Analysis of the Impact of Ecological Innovation and Green Investment on China’s CO2 Emissions

“…e explained variables in expressions (15) and ( 16) are mainly the proportion of the traditional economy, and the proportion of green investment and traditional economy can be found; according to the explained variables in expression (17) and expression (18) in the proportion of green investment, these two expressions can effectively study the relationship between the proportion of green investment and green investment. According to expression (15) and expression (17), the corresponding Fin is taken as the ratio of the traditional economy to green investment. From expression (15), we can see that there is a negative correlation between the proportion of the traditional investment and the traditional economy.…”

“…From expression (15), we can see that there is a negative correlation between the proportion of the traditional investment and the traditional economy. It can be seen from expression (17) that the proportion of traditional investment and green investment is positively correlated. According to expression (16) and expression (18), Fin is the ratio of green investment to the traditional economy.…”

“…In the expression, C represents user consumption, P represents the stock of carbon dioxide, if β > 0 occurs, it represents the impact strength index of carbon dioxide emissions on family life, and if ρ > 0 occurs, it represents the family patience index. The family utilizes the selected optimal consumption combination to maximize the family life, and the carbon dioxide emission is externally given to the family [ 17 ]. The dynamic expression that can realize the accumulation of household consumption after dealing with the problem of household consumption is as follows: …”

“…According to expression (17), dΩ/dθ > 0 can be obtained. If the green investment is higher, then the local economic growth rate is higher.…”

“…Substituting expression (17) into expression (22), the condition of carbon dioxide emission limitation is expressed by the green investment function. According to expression (17), the degree of influence of green investment on the economic growth rate can be realized. According to expression (22), the carbon dioxide emission limit is changed according to the economic growth rate.…”