The Impact of Carbon Emissions Trading and Market Participants on Green Innovation: A Synergistic Effect

Yucai Hu, Jiancheng Liu, Ruotong Hao, Jiaxin Shen and Shanshan Fan ()
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Yucai Hu: School of Economics and Management, Yanshan University, Qinhuangdao 066004, China
Jiancheng Liu: School of Economics and Management, Yanshan University, Qinhuangdao 066004, China
Ruotong Hao: School of Economics and Management, Yanshan University, Qinhuangdao 066004, China
Jiaxin Shen: School of Economics and Management, Yanshan University, Qinhuangdao 066004, China
Shanshan Fan: School of Economics and Management, Yanshan University, Qinhuangdao 066004, China

Sustainability, 2025, vol. 17, issue 5, 1-24

Abstract: How to incentivize green innovation is an important issue of great concern to scholars. Drawing on the theories of evolutionary analysis and neoclassical economic analysis, this study incorporates environmental policies and market participants into a unified analytical framework to explore the synergistic impacts of carbon emissions trading (CET) and market participants on green innovation. Using a sample of Chinese listed companies from 2006 to 2018, the empirical results based on the difference in difference (DID) model show the following: first, the CET pilot policy significantly promotes pilot firms’ green innovation; second, economic and environmental legitimacy are the mechanisms through which CET promotes corporate green innovation; and third, further analysis shows that CET and market participants have a synergistic effect on firms’ green innovation. This study provides new evidence as to how market-oriented CET affects green innovation through market participants, which provides a theoretical reference for policymakers to use market-based environmental regulation to promote green transformation.

Keywords: carbon emissions trading; market participants; synergistic effect (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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