The Impact of Carbon Emission Trading Policy on Enterprise ESG Performance: Evidence from China

Yadu Zhang, Yiteng Zhang and Zuoren Sun ()
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Yadu Zhang: SDU-ANU Joint Science College, Shandong University, Weihai 264209, China
Yiteng Zhang: School of Business, Shandong University, Weihai 264209, China
Zuoren Sun: School of Business, Shandong University, Weihai 264209, China

Sustainability, 2023, vol. 15, issue 10, 1-27

Abstract: The carbon emission trading system profoundly impacts enterprises’ sustainable development as an important market incentive environmental regulation tool. Through data collected from Chinese A-share listed enterprises in Shanghai and Shenzhen from 2011 to 2019 and Bloomberg ESG score data, this paper empirically analyses the impact of carbon emission trading policy on enterprise ESG performance and its channel mechanism using the difference-in-difference (DID) method. Results of this study indicate that carbon emission trading policy improves enterprise ESG performance significantly, and robustness tests confirm these findings. Carbon emission trading policy can encourage enterprises to enhance their R&D investments and promote internal controls, ultimately enhancing their ESG performance. Additionally, carbon emission trading policy positively impacts ESG performance in low-carbon enterprises, enterprises where the CEO is separated from the company, enterprises with a high degree of digital transformation, and enterprises receiving high government subsidies. This paper extends our research into the economic implications of carbon emission trading policy, enriching the literature on market-based environmental regulation policies’ impact on enterprise ESG performance. With respect to governments’ use of carbon emission trading to regulate enterprises environmentally, this paper provides theoretical guidance. It has significant practical implications for improving enterprise ESG performance and sustainability.

Keywords: carbon emission trading policy; ESG; environmental regulation; R&D investment; internal control level (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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