Evaluating the impact of carbon emissions trading scheme on Chinese firms' total factor productivity

In the context of addressing climate change and promoting high-quality development, it is necessary to evaluate the impact of carbon emissions trading scheme (ETS) on China's total factor productivity (TFP). Based on a quasi-experimental design, we provide firm-level evidence of TFP improvement from China's pilot ETSs. Using panel data of Chinese listed firms during 2009e2018, the difference-in-differences method is adopted to evaluate the impact of ETS on the firm-level TFP. The results show that the ETS significantly improves the firm-level TFP, increasing it in pilot regions by approximately 14% when compared with non-pilot regions. Further analysis shows that this improvement is not affected by the heterogeneity of firms' ownership, but by industrial heterogeneity. Moreover, this improvement is realized by promoting firms' operating and profitability capacity. We also find that the impact of ETS on firm-level TFP is stable and exhibits no time lag. Our findings not only improve the effectiveness evaluation framework of the Chinese ETS, but also have some implications for how to promote the construction of a national carbon emissions trading market in the context of high-quality development. (c) 2021 Elsevier Ltd. All rights reserved.

Automated summary

The study found that under the pilot carbon emissions trading scheme (ETS) in China, the total factor productivity (TFP) of firms has improved, and this improvement is not influenced by firm ownership but mainly by industrial heterogeneity. The ETS has achieved an increase in TFP by promoting firms' operating and profitability capacity.