Carbon Emissions trading, regional heterogeneity, and green innovation: Evidence from a quasi-natural experiment in China
Emissions trading; Regional heterogeneity; Green innovation; Synthetic control model; Moderating effect model; Dynamic effect
Energy and Sustainable Green Development > 1. Energy Policy Research
Draft Paper Accepted
Wang Xu / China University of Mining and Technology
China has implemented carbon trading pilot policy to force incumbent firms to conduct green innovation. However, there are significant differences in economic development, system design and policy enforcement among the eight pilot regions. To this end, we try to use the synthetic control approach to identify the heterogenous effect of regional ETSs on green innovation. Furthermore, we also test the regional-specific effect through the moderated regression analysis, take the roles of carbon market liquidity, ETS coverage and regional economic development into account. Finally, we adopt the dynamic regression model to verify the annual treatment effect of the ETS as well as the varying effect on green innovation from different pilot ETSs. The empirical results show that only Hubei and Guangdong ETSs have effectively promoted the green innovation, while the Tianjin ETS has a short-term promotion effect before the economic sluggish period. However, the pilot ETSs in other regions have not a positive effect on green innovation with the different evolution path. Meanwhile, only in Hubei and Guangdong can the pilot ETSs have a continuous positive effect on green innovation on year-by-year basis. The appropriate industrial coverage and emissions control target as well as the active trading platform have been identified as important factors to positively moderate the effect of regional ETS on promoting green innovation. Then the Chinese central government should take full account of the regional heterogeneity and then make full use of the national ETS to promote green innovation. The local regulators can have some flexibility to determine and adjust the appropriate emissions reduction target promptly. Furthermore, the policymakers should take the emissions from primary energy consumption in the major energy-intensive industrial sectors as the main coverage of the national ETS. In addition, the regulators can further strengthen the supervision on allowance trading and compliance behavior of the incumbent firms.