The Impact of China’s ETS on Corporate Green Governance Based on the Perspective of Corporate ESG Performance

Abstract

To achieve China’s “dual carbon” and common prosperity goals, corporate green governance is crucial. A key tool for promoting green growth is environmental legislation, particularly market-based regulation. With China’s carbon emission trading as a natural experiment, we adopt the DID method to quantitatively compare the gap between ESG performance of pilot and non-pilot carbon trading enterprises before and after policy implementation, thereby examining the impact, mechanism and optimization conditions of market-based environmental policy on corporate green governance based on panel data of China’s A-share listed companies from 2007 to 2019. In addition, PSM-DID and other methods are employed for preventing estimation bias caused by sample self-selection bias. It is found that: (1) the green governance level of pilot firms can be considerably improved by a carbon emission trading scheme (ETS); (2) the ETS primarily encourages enterprises to uphold their ESG obligations through increasing regulatory pressure from the government and corporate involvement in clean innovation; (3) enhancing regional marketization can strengthen the impact of carbon trading policy, and enterprises that are large and non-state-owned exhibit better performance with regard to green governance as a result of carbon trading policy. This paper provides practical experience for promoting corporate green governance to achieve the “dual carbon” goal based on a market mechanism from a micro perspective.

Study on the effect of carbon trading on the carbon emission intensity of enterprises—a mechanism test based on ESG performance

“…The results in Table 3 show that the emission reduction effect of carbon trading policy is affected by the degree of regional marketization: the degree of marketization plays a positive moderating role in the relationship between the role of carbon trading policy on carbon emission reduction of enterprises, and all of them are significant at the 1% level. This result is consistent with the results of existing studies, that is, the emission reduction effect of carbon trading is more significant in regions with higher levels of marketization, indicating that market-oriented reforms can effectively enhance the effectiveness of the policy and achieve the goal of low-carbon development (Wang et al, 2023;Yao et al, 2023).…”

"Greenwashing" or "Helping": ESG Performance and Chinese Firm Total Factor Productivity

“…This leads to high-quality companies finding it challenging to obtain substantial funding for innovative activities, while less efficient companies can continue to acquire funds for less efficient production models. In [11], the authors demonstrated that the ESG rating of listed companies can reflect a company's level of corporate governance and effectively indicate the quality of information disclosure. There exists a significant positive correlation between these two aspects.…”

“…There exists a significant positive correlation between these two aspects. Additionally, higher levels of corporate governance can effectively reduce situations where management sacrifices the company's long-term interests for personal gains due to agency problems and significantly curb the interests' encroachment by major shareholders [11][12][13]. By fully disclosing relevant information, companies enable investors to better understand their developmental status, facilitating the movement of capital in the capital market toward high-quality companies.…”

The Impact of Patent Applications in the Context of the ESG Model at World Level

“…The adoption of an environmental protection tax in China has increased either the ESG orientation of firms either the ability of companies to invest in green patenting [22]. Environment Trade System-ETS has a positive impact either on ESG either on green patenting in China [23].…”