Carbon emission right circulation and corporate green innovation: Evidence from a quasi-natural experiment in China

Yuting Huang, Wen Wen and Rui Bao

Finance Research Letters, 2024, vol. 69, issue PA

Abstract: This paper studies how carbon emissions right circulation affects corporate green innovation performance. Using the carbon emissions trading policy in China as a quasi-natural experiment, we find that carbon emission right circulation has a significant positive impact on corporate green innovation performance. This finding is robust to various checks, including the parallel trend analysis, placebo test, the instrumental variable approach, and alternative measures of green innovation. Mechanism tests show that the carbon emission right circulation policy promotes corporate green innovation performance by reducing environmental uncertainty, alleviating financing constraints, and improving external monitoring. In addition, cross-sectional analyses reveal that the positive impact of carbon emission right circulation on corporate green innovation is more significant in firms without political connections and lower levels of capacity utilization.

Keywords: Carbon emission rights circulation; Green innovation; Environmental uncertainty; Financing constraints; External monitoring (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:69:y:2024:i:pa:s1544612324011723

DOI: 10.1016/j.frl.2024.106143

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