Emission trading, induced innovation and firm performance

Shenggang Ren, Xuanyu Yang, Yucai Hu and Julien Chevallier

Energy Economics, 2022, vol. 112, issue C

Abstract: Whether or not carbon emission policies can achieve the “double dividend” of carbon reduction and economic growth is vital for realizing sustainable development. This paper investigates whether a market-based carbon emissions trading scheme (ETS) can stimulate firm innovation and further achieve a win-win situation for environmental and economic performance. Based on panel data for listed firms from 2006 to 2017, we use a difference-in-differences model to investigate the effects of China's ETS pilot policy. The results show that first, the pilot ETS is related positively to firm environmental and economic performance and performs better in areas with more stringent emissions caps, and second, that the pilot ETS is positively correlated with firm innovation. Moreover, further analysis shows that innovation induced by the ETS significantly improves firm environmental and economic performance. These findings suggest that imposition of an ETS which induces innovation could achieve a win-win situation for environmental and economic performance and provides direct empirical evidence supporting the Porter hypothesis.

Keywords: Emissions trading; Induced innovation; Firm performance; Porter hypothesis (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988322003115
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:112:y:2022:i:c:s0140988322003115

DOI: 10.1016/j.eneco.2022.106157

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().