Journal
CLIMATE POLICY
Volume 21, Issue 3, Pages 318-336Publisher
TAYLOR & FRANCIS LTD
DOI: 10.1080/14693062.2020.1864268
Keywords
Pilot carbon trading policy; difference-in-difference model; low-carbon innovation; financing constraints; carbon allowance allocation methods
Categories
Funding
- National Key R&D Program of China [2018YFC1509005]
- Major Program of National Social Science Foundation of China [18ZDA107]
- pilot programmes for major science, technology and innovation projects toward 2030 of China Energy Investment Corporation [GJNY2030XDXM-19-20.1]
- Youth Academic Team in Humanities and Social Sciences of Wuhan University [4103-413100001]
- National Social Science Foundation of China [19CJY021]
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This study examines the impact of China's pilot carbon trading policy on low-carbon innovation, finding that the policy is expected to promote low-carbon innovation by alleviating financing obstacles. Additionally, the study suggests that the benchmarking method is more effective in encouraging low-carbon innovation compared to other allocation methods.
China's pilot carbon trading policy is expected to be both efficient and flexible in reducing carbon emissions through incentivising low-carbon innovation. This paper analyses the effects of this pilot policy on low-carbon innovation using a difference-in-difference model, based on a sample of selected enterprises and carrying out a series of robustness tests to corroborate the results. The analysis shows that the pilot carbon trading policy is predicted to have a significantly positive effect on the low-carbon innovation of enterprises that fall under its scope, notably by alleviating obstacles to the financing of low-carbon innovation. Furthermore, a heterogeneity analysis of enterprises' characteristics and carbon allowance allocation methods in different pilots indicates that the effect of the pilot carbon trading policy on enterprises' low-carbon innovation will be reflected mainly in enterprises in China's eastern provinces, and in state-owned enterprises. Compared with the grandfathering and historical intensity allocation methods, the findings of this study suggest that the extent of low-carbon innovation is significantly greater when the benchmarking method is used. The results of this paper offer some key insights into improving the policy design of a nationwide carbon trading market in China, as well as a reference point for other countries and regions, especially developing countries, in establishing a carbon trading market.
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