Carbon Border Adjustment Mechanism as a Catalyst for Greenfield Investment: Evidence from Chinese Listed Firms Using a Difference-in-Differences Model

Jiayi Liu (), Weidong Wang, Tengfei Jiang, Huirong Ben and Jie Dai
Additional contact information
Jiayi Liu: School of Finance and Economics, Jiangsu University, Zhenjiang 212000, China
Weidong Wang: School of Finance and Economics, Jiangsu University, Zhenjiang 212000, China
Tengfei Jiang: School of Finance and Economics, Jiangsu University, Zhenjiang 212000, China
Huirong Ben: School of Finance and Economics, Jiangsu University, Zhenjiang 212000, China
Jie Dai: School of Finance and Economics, Jiangsu University, Zhenjiang 212000, China

Sustainability, 2025, vol. 17, issue 8, 1-21

Abstract: Research on the EU’s Carbon Border Adjustment Mechanism (CBAM) has predominantly examined its implications for climate governance and export trade yet overlooked how enterprises adapt their foreign investment strategies. Using panel data from Chinese listed companies between 2011 and 2022, this study employs the CBAM as a quasi-natural experiment and applies a difference-in-differences (DID) model for analysis. Our findings indicate that the CBAM has a significant positive impact on outward greenfield investments, as robustly validated through a series of rigorous robustness checks. Mechanism analysis reveals two operational channels: trade restructuring effect (reduced export shares) and innovation-driven demand effect (enhanced R&D intensity). Heterogeneity tests further indicate more substantial CBAM responsiveness among eastern coastal firms, non-state-owned enterprises, and those pursuing horizontal production-oriented expansions. This study contributes to the literature on CBAM’s effects and offers practical recommendations for enterprises to mitigate CBAM’s impact via greenfield investments.

Keywords: EU’s Carbon Border Adjustment Mechanism; greenfield investment; DID (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2071-1050/17/8/3492/pdf (application/pdf)
https://www.mdpi.com/2071-1050/17/8/3492/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:17:y:2025:i:8:p:3492-:d:1634194

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().