Transformative Influence of Emissions Trading Schemes on Corporate Investments: Insights from the People’s Republic of China

Nguyen Hanh Luu (), Dinh Trung Nguyen, Dao Le Trang Anh () and Uyen Ngoc Phung ()
Additional contact information
Nguyen Hanh Luu: VNU University of Economics and Business, Vietnam National University (VNU), Ha Noi, Viet Nam
Dinh Trung Nguyen: VNU University of Economics and Business, Vietnam National University (VNU), Ha Noi, Viet Nam
Dao Le Trang Anh: Business School, RMIT University Viet Nam, Ha Noi, Viet Nam
Uyen Ngoc Phung: VNU University of Economics and Business, Vietnam National University (VNU), Ha Noi, Viet Nam

Asian Development Review (ADR), 2025, vol. 42, issue 03, 29-50

Abstract: This paper examines whether and how the emissions trading schemes (ETS) pilot program could influence the capital expenditures of firms in the People’s Republic of China (PRC). We use the ETS pilot in the PRC as a quasinatural experiment and obtain a comprehensive dataset of 28,213 firm–year observations, covering 3,557 listed Chinese firms observed annually between 2010 and 2022. We use difference-in-differences regressions to examine the impacts of the ETS pilot on the capital investments of firms. We document that the ETS pilot could motivate firms to increase their capital investments. This finding holds in various robustness and sensitivity checks, including dynamic timing tests, placebo tests, and subsample analyses that exclude outliers. Importantly, we further document that innovative firms increase capital expenditures more following the ETS, whereas noninnovative firms do not increase capital investments after the ETS pilot. These findings suggest that the ETS could play a pivotal role in advancing the PRC’s economic restructuring efforts.

Keywords: CAPEX; difference-in-differences; emissions trading schemes; environmental regulations; People’s Republic of China (search for similar items in EconPapers)
JEL-codes: O38 Q52 Q58 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0116110525500180
Open Access

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:wsi:adrxxx:v:42:y:2025:i:03:n:s0116110525500180

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0116110525500180

Access Statistics for this article

Asian Development Review (ADR) is currently edited by Tetsushi Sonobe

More articles in Asian Development Review (ADR) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().