Carbon emissions regulation, input-output networks, and firm dynamics: The case of a low-carbon-zone pilot in China

Xiangyu Shi and Chang Wang

MPRA Paper from University Library of Munich, Germany

Abstract: Input-output linkages among sectors and firms are largely overlooked when assessing regulatory policies. Using a carbon emissions regulation in China as an example, we find that the regulation facilitates the transition to green technologies and reduces entry and carbon emissions in the regulated sectors with large carbon emissions. We also find unintended spillovers via the input-output network, resulting in more entry and innovation in the downstream sectors; and less entry and innovation in the upstream sectors. These facts can be rationalized by a firm-dynamics model with input-output linkages. The results of quantitative exercises are much different when taking input-output linkages into account.

Keywords: carbon emissions regulation; firm dynamics; innovation; input-output networks (search for similar items in EconPapers)
JEL-codes: C1 D2 E2 L2 Q5 (search for similar items in EconPapers)
Date: 2024-06
New Economics Papers: this item is included in nep-bec, nep-cna, nep-ene, nep-ent, nep-env and nep-sbm
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