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Global warming can be solved with carbon trading. When carbon emissions become a commodity, it can be a powerful motivator for companies to optimize production capacity and innovate technologically. The goal of this paper is to examine the way in which China's carbon emissions trading policy (CET) influences firm technological innovation in seven pilot regions, using a sample of firms in eight high-carbon industries. We employ difference-in-difference (DID) as well as DID-based propensity score matching (PSM-DID) models to investigate the influence of China's carbon emission policy on firms' technological innovation by using 4745 observations of 749 A-share listed firms in eight high-carbon industries in mainland China from 2007 to 2021. According to the findings, China's CET policy significantly boosts firms' technological innovation, and this beneficial effect persists even after a series of robustness tests that change the policy's implementation year and the technological innovation measure. Further analysis shows that this positive effect is heterogeneous across high-carbon industries and firms with different ownership. In addition, based on the external governance perspective, we find that CET policy performs better in firms in high-carbon industries with a sizable portion of ownership held by institutional investors. This study suggests the effectiveness of CET policy in promoting firms' technological innovation, confirms empirical evidence for Porter's hypothesis, and provides a basis for Chinese firms to achieve their emission reduction targets by improving technological innovation. [ABSTRACT FROM AUTHOR]

Emission trading scheme (ETS) is considered as a tool to reduce emissions at a low cost, which can effectively promote the carbon peak and carbon neutrality. As the main participants in the carbon emission trading (CET) market, the behavior and strategies for governments and different types of enterprises affect the final emission reduction performance. Taking the national carbon market as an example, this paper constructs a tripartite evolutionary game model including governments and power generation enterprises with different emission reduction capacity to analyze the possible game situations in the development process of the CET market. The results show that with the development of the CET market, the governments and power generation enterprises will have different game results. In order to achieve the optimal stable equilibrium and maximize carbon emission reduction, governments should improve regulatory efficiency and formulate appropriate incentive strategies for excess emission reduction and punishment strategies for insufficient emission reduction. In addition, the initial willingness will not affect the final strategy choice of the three parties. Reasonable free carbon quota ratio, lower technology emission reduction cost and higher carbon price can stimulate the enthusiasm of governments and enterprises to reduce emissions. The above results provide a reference for coordinating the relationships between governments and power generation enterprises with different emission reduction capacity in the construction of the CET market in the future. [ABSTRACT FROM AUTHOR]

This paper examines the risk spillover effect between the carbon market and the stock market in China and the role of corporate social responsibility (CSR) on this effect. Employing Beijing, Hubei, and Guangdong carbon markets, we apply time-domain and frequency-domain spillover approaches and find that during the Chinese stock market crisis in 2015, risk spillovers from the stock market to the carbon market were more pronounced. Additionally, CSR firms are more dominant as information transmitters than those non-CSR (NCSR) firms in the carbon market. However, plausibly, due to the infancy of carbon trading, our results show that the level of connectedness between the carbon market and the stock market in China is relatively low. [ABSTRACT FROM AUTHOR]

The implementation of market-based climate policies represented by the emission trading system (ETS) is an important path for countries to participate in global climate governance and achieve the goals of carbon emission peaking and carbon neutrality. Whether the covered firms can improve financial performance through bearing responsibility for cutting emissions, a "win-win" of environmental and economic achievement, is an important way to evaluate the effectiveness of ETS. Based on the Chinese A-share listed firms in industrial sector during the period of 2010–2017, this paper employs PSM-DID method to investigate the impact of China's pilot ETS on financial performance of the covered firms. The results show that the covered firm's financial performance is improved by the implementation of pilot ETS, which can increase firm's ROA by 0.01 unit. Specifically, the pilot ETS can significantly improve the financial performance of non-state-owned firms, without affecting state-owned firms. Similarly, the financial performance improvement is more significant for firms in non-energy industries. Furthermore, the pilot ETS can motivate the covered firms to gain financial profit through cutting carbon emission as a mediation path, and the mediation effect size of carbon emission intensity is 0.001. Besides, firm's innovation ability weakens this mediation path, and the well-developed institutions in pilot area, proxied by high degree of marketization, only weaken the first part of the path, namely, carbon emission reduction led by ETS. • ETS achieves a win-win of carbon emission reduction and financial performance improvement. • The improvements by ETS are heterogeneous in ownership and industry. • Firm's carbon emission intensity plays a mediation role. • Firms can gain more benefit under the ETS regulation if the market monopoly is strong. [ABSTRACT FROM AUTHOR]