Reshaping Sustainable Technology Progress: The Role of China’s National Carbon Unified Market in the Power Sector

Jingwen Xia, Qinghua Pang and Fan Ren ()
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Jingwen Xia: School of Economics, Zhejiang University, Hangzhou 310058, China
Qinghua Pang: School of Economics and Finance, Hohai University, Changzhou 213200, China
Fan Ren: School of Economics, Zhejiang University, Hangzhou 310058, China

Sustainability, 2025, vol. 17, issue 18, 1-24

Abstract: To achieve carbon peak and neutrality goals and promote sustainable development, the power sector, as China’s largest source of carbon emissions, is the first industry to implement the national carbon emission trading scheme (ETS). A differences-in-differences model is employed on firm-level data to assess the causal impact of China’s national ETS, launched in 2017, on the sustainable technology progress of power generation enterprises. This study employs green patents and total factor productivity as measures for sustainable technology progress and then explores mechanisms and heterogeneity of the impact. Results show that: (1) The national ETS has a positive effect on green innovation capability and efficiency in the power industry, and the increasing causal effect is mainly achieved through research and development expenditure. (2) The national ETS exerts a more significant positive effect on power generation enterprises that are non-state-owned, have smaller asset scale, demonstrate superior environmental performance, and are located in the eastern region. However, there is no significant difference in total factor productivity across power enterprises. (3) Green innovations are predominantly concentrated in new energy and hybrid power generation enterprises. This study contributes to the literature by providing novel empirical evidence from China’s national ETS, highlighting its dual impact on innovation and productivity within a unified framework. The findings not only offer targeted recommendations for China’s power sector but also serve as an important reference for other high-emitting industries and other regions worldwide facing the same challenges in their pursuit of sustainable development.

Keywords: China’s national carbon emission trading scheme market; difference-in-difference method; green innovation; total factor productivity (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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