Does energy-consuming right trading have double dividend effect on firm's economic performance and carbon emission?

Whether the market-based environmental regulation policy can achieve a win-win situation of economic growth and carbon emission reduction has always been an academic controversial topic. Taking the pilot policy of energy-consuming right trading (ECRT) of China in 2016 as a quasi-natural experiment, this paper uses the difference-in-differences (DID) method to investigate the policy impact of ECRT on the economic performance and carbon emissions of firms. An economy-environment composite index has been conducted for testing double dividend effect of ECRT. The empirical results show that ECRT can improve the economic performance and reduce carbon emissions of firms significantly. The double dividend effect is more significant in high-carbon emission firms, non-state-owned firms and prior to COVID-19 pandemic. ECRT policy has Porter innovation mechanism, in which innovation input is the main contribution of economic dividend effect and green technology innovation is the main contribution of environmental dividend effect. The conclusions of this paper provide empirical evidence and policy implications for realizing the common development of economy and environment, accelerating the process of emission reduction and building a national energy trading market.

Automated summary

This study uses the pilot policy of energy-consuming right trading in China as a quasi-natural experiment to investigate its impact on the economic performance and carbon emissions of firms. The empirical results show that energy-consuming right trading can significantly improve economic performance and reduce carbon emissions. The double dividend effect is more significant in high-carbon emission firms, non-state-owned firms, and prior to the COVID-19 pandemic. The study also finds that the policy has a Porter innovation mechanism, where innovation input contributes to the economic dividend effect and green technology innovation contributes to the environmental dividend effect.