Sustainability, Vol. 18, Pages 1207: The Effects of Carbon Emission Rights Trading Pilot Policy on Corporate Green Innovation: Evidence from PSM-DID and Policy Insights

Sustainability doi: 10.3390/su18031207

Authors:
Huilu Jiang
Zhixi Liu
Zhenlin Chen

Global warming threatens sustainable human development, and carbon emission rights trading (CERT) has emerged as a key market-based tool for reducing emissions. Yet evidence on how CERT affects corporate green innovation—especially high-quality, substantive innovation—remains mixed and fragmented. Using unbalanced panel data on Chinese A-share listed firms from 2007 to 2016 and applying fixed-effect, DID, and PSM-DID models, this study examines the impact of China’s CERT pilot policy on quota-managed firms’ green innovation. The results show that the policy primarily stimulates substantive green innovation, reflected in green invention patents, with limited influence on strategic, low-novelty patents. Its effects are stronger for firms in central and western pilot regions, in non-high-tech industries, and at more mature stages of development, and differ between firms that anticipated regulation and those brought under quota management unexpectedly. Overall, the findings indicate that a well-designed carbon trading mechanism can reallocate resources to incentivize high-quality green innovation, offering micro-level support for Coasian market-based approaches to environmental externalities and informing the further development of China’s national carbon market.

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Huilu Jiang www.mdpi.com