Carbon emission trading policy and corporate green innovation: internal incentives or external influences

The carbon emission trading policy (CETP) is a market-based environmental instrument to reduce carbon emissions and address climate change. It can further have an impact on companies' green innovation (GI). In this regard, we innovatively propose the internal and external theoretical mechanisms of the impact of CETP on the GI of companies and use the financial data and patent data of Chinese listed companies from a micro perspective to empirically verify them. The findings demonstrate that the CETP has an inducing effect on the GI of companies, which is particularly evident in nonstate-owned companies, large companies, and the cleaning industry. The impact of CETP on companies GI is mainly achieved through internal incentive mechanisms, while the role of external influence mechanisms is not obvious. In terms of internal incentives, cost compliance effects and innovation compensation effects are the main channels for promoting GI. In terms of external effects, the carbon market's efficacy has not contributed to boosting GI for companies; the coordination effect of carbon policy and government intervention on companies' GI is also limited. Our research provides a theoretical basis for effectively encouraging the GI of companies to achieve carbon neutral and carbon peak goals.

Automated summary

The carbon emission trading policy has an inducing effect on companies' green innovation, particularly evident in nonstate-owned companies, large companies, and the cleaning industry. The impact on green innovation is mainly achieved through internal incentive mechanisms, while the role of external influence mechanisms is not obvious.