Going green or losing edge? The impact of government procurement on carbon reduction and firm value in China

Jun Liu, Weilin Zhao and Castiel Chen Zhuang

Energy Economics, 2025, vol. 142, issue C

Abstract: This paper explores whether all-purpose government procurement can achieve carbon reduction through firms without dampening their market values. By analyzing data from Chinese listed firms between 2015 and 2022, we find that firms receiving any government procurement contracts can reduce carbon emission intensity while maintaining values, exhibiting both long-term effects for bid-winning firms and short-term spillover effects for other firms within the same industry. This can be attributed to both supply- and demand-side factors: government procurement provides crucial operation funds and encourages productive innovation, whereas the increased ESG scores rated by third-party organizations brought by procurement help alleviate financing constraints. Our main conclusion for the decarbonization effect is notable for both local and cross-regional procurement, non-state-owned firms, and smaller firms, while firms in the pilot regions of carbon trading market experience an evident increase in firm value due to government procurement. The main findings are robust to a county-level aggregate setting and have been validated through an instrumental variable approach and a difference-in-differences strategy.

Keywords: Government procurement; Firm value; Carbon reduction; Economic development (search for similar items in EconPapers)
JEL-codes: H57 P28 Q56 Q57 R11 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:142:y:2025:i:c:s0140988325000428

DOI: 10.1016/j.eneco.2025.108219

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