Can environmental innovation facilitate carbon emissions reduction? Evidence from China

Environmental innovation has been recognized as an efficient way of addressing environmental problems. However, how environmental innovation may affect carbon emissions in China and whether the effect may differ among various environmental innovation variables remain to be investigated. Therefore, based on the panel data of China's 30 provinces during 2000-2013, we use a system generalized method of moments (SGMM) technique to estimate the effect of environmental innovation on carbon emissions in China. Also, we evaluate the effect on carbon emission reduction of China's initial carbon emissions trading (CET) scheme. Empirical results indicate that, most environmental innovation measures in China reduce carbon emissions effectively. Among the various environmental innovation factors, energy efficiency exerts the most evident effect on carbon emissions abatement in China; meanwhile, resources for innovation and knowledge innovation also play prominent roles in this regard. However, the impact of governmental environmental policies on curbing carbon emissions reduction suffers from a lag effect, which mainly occurred during 2006-2013. Finally, despite the short time of operation and incomplete market mechanism, the pilot CET in China has appeared relatively promising with regard to carbon emissions reduction.