Blessing or curse? Market-driven environmental regulation and enterprises' total factor productivity: Evidence from China's carbon market pilots

Caiquan Bai, Hangjuan Liu, Rongjie Zhang and Chen Feng

Energy Economics, 2023, vol. 117, issue C

Abstract: This study explores the question of whether building a unified carbon market is a blessing or a curse for enterprises in China under the background of global carbon emission reduction goals. Using data on China's A-share listed enterprises and city panel data from 2008 to 2019, we evaluate the effect of China's carbon market pilots, a market-driven environmental regulation policy, on enterprises' total factor productivity (TFP). The findings indicate that the pilot policy promoted enterprises' TFP in the pilot areas by approximately 0.05 on average during the sample period. In particular, the TFP of enterprises in high‑carbon emission industries increased by an average of 0.11. This positive effect is confirmed in the robustness tests. Meanwhile, the effect also is heterogeneous for different regions and enterprises. It depends on enterprise scale, property rights, governance level, financing constraints and registration address. Additionally, the promotion effect works through three channels, including government environmental protection efforts, enterprise resource allocation optimization, and increased investment in R&D. Therefore, building a carbon market is proven to be positive for the development of enterprises. This study enriches the research on pollution control and economic growth and provides policy references for achieving carbon reduction goals.

Keywords: Environmental regulation; Market-driven; Carbon emissions trading; Total factor productivity (search for similar items in EconPapers)
JEL-codes: D24 L25 Q58 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988322005618
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:117:y:2023:i:c:s0140988322005618

DOI: 10.1016/j.eneco.2022.106432

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 ().