The effect of the carbon emission trading scheme on a firm’s total factor productivity: An analysis of corporate green innovation and resource allocation efficiency

Abstract

This study investigates the effect of the carbon emission trading scheme on a firm’s total factor productivity in China. With a sample from 2008 to 2019, applying the time-varying DID method, our empirical results reveal that the carbon emission trading scheme significantly improves a firm’s total factor productivity, which provides evidence for Porter’s hypothesis. Moreover, there are two channels through which the total factor productivity is impacted: the corporate green innovation channel and the resource allocation efficiency channel. Furthermore, the impact of the carbon emission trading scheme is more pronounced for private firms, and firms in the provinces with higher institutional development, lower environmental quality, and greater law enforcement of environmental protection tend to have larger total factor productivity. Our models survive numerous robustness checks.

Impact of independent director network on corporate green innovation: Evidence from Chinese listed companies

“…Existing research analyzes the roles of internal and external organizational factors in driving corporate green innovation based on institutional theory, stakeholder theory, and resource‐based theory (Amore & Bennedsen, 2016; Dai et al, 2015; Demirel & Kesidou, 2019; Kassinis et al, 2016; Wang et al, 2022). According to institutional economics, environmental regulations increase firms’ environmental compliance costs and crowd out production expenditure, which inhibits firms’ green innovation behavior and has an “innovation offset” effect (Frondel et al, 2008; Shadbegian & Gray, 2005).…”

“…The study of green innovation drivers includes three main areas. First, it is the government's environmental policy, such as voluntary emission reduction program, carbon trading rights, environmental subsidies, and green financial instruments (Calel & Dechezlepretre, 2016; Khoruzhy et al, 2022; Tian et al, 2022; Wang et al, 2022). Second, the stakeholder pressure factors include competitive pressures, customers and suppliers, and community stakeholders’ environmental claims (Cai & Li, 2018; Dai et al, 2015; Demirel & Kesidou, 2019; Lin et al, 2014; Qi et al, 2013; Zhang et al, 2015).…”

The Impact of Green Mergers and Acquisitions on Corporate Environmental Performance: Evidence from China’s Heavy-Polluting Industries

“…On the one hand, green M&As can significantly reduce the risk of enterprise green technological innovation, thus enhancing green technological innovation. Knowledge is an important source of competitive advantage for enterprises, but for a long time, China has overly relied on the crude development model, and the experience accumulated in the past is mainly concentrated in the field of high-pollution, high-energy-consumption or high-emission production, which makes it easy to form a traditional mindset lock within the enterprise, and it is difficult to break through the existing knowledge base to carry out green technological innovation [61,62]. The target companies of green M&As are carefully selected acquisition targets of heavy polluters with certain green sustainable development advantages.…”

Environmental regulation and carbon emission efficiency: Evidence from pollution levy standards adjustment in China

“…Meanwhile, to better identify the causal inference, this paper employs a quasi-natural experiment: the Pollution Levy Standards Adjustment in China. Second, to consider the spatial correlation, this paper applies spatial difference-in-difference (DID) method for estimation instead of traditional DID model [ 18 , 19 ]. Traditional DID method only considers the direct effect of PSLA, however, carbon emission features spillover effect among different cities, which can be shown by spatial DID method.…”