The Effects of Carbon Emission Rights Trading Pilot Policy on Corporate Green Innovation: Evidence from PSM-DID and Policy Insights

Huilu JIANG; Zhixi LIU; Zhenlin CHEN

doi:10.3390/su18031207

The Effects of Carbon Emission Rights Trading Pilot Policy on Corporate Green Innovation: Evidence from PSM-DID and Policy Insights

Huilu JIANG
, Zhixi LIU
, Zhenlin CHEN^*

^*Corresponding author for this work

School of Graduate Studies

Research output: Journal Publications › Journal Article (refereed) › peer-review

1 Citation (Scopus)

Abstract

Global warming threatens sustainable human development, and carbon emission rights trading (CERT) has emerged as a key market-based tool for reducing emissions. Yet evidence on how CERT affects corporate green innovation—especially high-quality, substantive innovation—remains mixed and fragmented. Using unbalanced panel data on Chinese A-share listed firms from 2007 to 2016 and applying fixed-effect, DID, and PSM-DID models, this study examines the impact of China’s CERT pilot policy on quota-managed firms’ green innovation. The results show that the policy primarily stimulates substantive green innovation, reflected in green invention patents, with limited influence on strategic, low-novelty patents. Its effects are stronger for firms in central and western pilot regions, in non-high-tech industries, and at more mature stages of development, and differ between firms that anticipated regulation and those brought under quota management unexpectedly. Overall, the findings indicate that a well-designed carbon trading mechanism can reallocate resources to incentivize high-quality green innovation, offering micro-level support for Coasian market-based approaches to environmental externalities and informing the further development of China’s national carbon market.

Original language	English
Article number	1207
Number of pages	31
Journal	Sustainability
Volume	18
Issue number	3
Early online date	24 Jan 2026
DOIs	https://doi.org/10.3390/su18031207
Publication status	Published - 1 Feb 2026

Bibliographical note

The authors would like to acknowledge the administrative support from the School of Economics and Management at Beijing University of Technology, the School of Political Science & Public Administration at Wuhan University, and the Graduate School of Lingnan University. During the preparation of this manuscript, the authors did not use any Generative Artificial Intelligence (GenAI) tools for data collection, statistical analysis, or substantive content generation. Any language editing assistance was carefully reviewed and verified by the authors.

Publisher Copyright:
© 2026 by the authors.

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 8 Decent Work and Economic Growth
SDG 9 Industry, Innovation, and Infrastructure
SDG 13 Climate Action
SDG 17 Partnerships for the Goals

Keywords

carbon emission trading pilot
corporate innovation
green innovation
low-carbon economy

Access to Document

10.3390/su18031207Licence: CC BY

Cite this

@article{703c65306fb94f20ad23089866ed163e,

title = "The Effects of Carbon Emission Rights Trading Pilot Policy on Corporate Green Innovation: Evidence from PSM-DID and Policy Insights",

abstract = "Global warming threatens sustainable human development, and carbon emission rights trading (CERT) has emerged as a key market-based tool for reducing emissions. Yet evidence on how CERT affects corporate green innovation—especially high-quality, substantive innovation—remains mixed and fragmented. Using unbalanced panel data on Chinese A-share listed firms from 2007 to 2016 and applying fixed-effect, DID, and PSM-DID models, this study examines the impact of China{\textquoteright}s CERT pilot policy on quota-managed firms{\textquoteright} green innovation. The results show that the policy primarily stimulates substantive green innovation, reflected in green invention patents, with limited influence on strategic, low-novelty patents. Its effects are stronger for firms in central and western pilot regions, in non-high-tech industries, and at more mature stages of development, and differ between firms that anticipated regulation and those brought under quota management unexpectedly. Overall, the findings indicate that a well-designed carbon trading mechanism can reallocate resources to incentivize high-quality green innovation, offering micro-level support for Coasian market-based approaches to environmental externalities and informing the further development of China{\textquoteright}s national carbon market.",

keywords = "carbon emission trading pilot, corporate innovation, green innovation, low-carbon economy",

author = "Huilu JIANG and Zhixi LIU and Zhenlin CHEN",

note = "The authors would like to acknowledge the administrative support from the School of Economics and Management at Beijing University of Technology, the School of Political Science \& Public Administration at Wuhan University, and the Graduate School of Lingnan University. During the preparation of this manuscript, the authors did not use any Generative Artificial Intelligence (GenAI) tools for data collection, statistical analysis, or substantive content generation. Any language editing assistance was carefully reviewed and verified by the authors. Publisher Copyright: {\textcopyright} 2026 by the authors.",

year = "2026",

month = feb,

day = "1",

doi = "10.3390/su18031207",

language = "English",

volume = "18",

journal = "Sustainability",

issn = "2071-1050",

publisher = "Multidisciplinary Digital Publishing Institute (MDPI)",

number = "3",

}

TY - JOUR

T1 - The Effects of Carbon Emission Rights Trading Pilot Policy on Corporate Green Innovation: Evidence from PSM-DID and Policy Insights

AU - JIANG, Huilu

AU - LIU, Zhixi

AU - CHEN, Zhenlin

N1 - The authors would like to acknowledge the administrative support from the School of Economics and Management at Beijing University of Technology, the School of Political Science & Public Administration at Wuhan University, and the Graduate School of Lingnan University. During the preparation of this manuscript, the authors did not use any Generative Artificial Intelligence (GenAI) tools for data collection, statistical analysis, or substantive content generation. Any language editing assistance was carefully reviewed and verified by the authors. Publisher Copyright: © 2026 by the authors.

PY - 2026/2/1

Y1 - 2026/2/1

N2 - Global warming threatens sustainable human development, and carbon emission rights trading (CERT) has emerged as a key market-based tool for reducing emissions. Yet evidence on how CERT affects corporate green innovation—especially high-quality, substantive innovation—remains mixed and fragmented. Using unbalanced panel data on Chinese A-share listed firms from 2007 to 2016 and applying fixed-effect, DID, and PSM-DID models, this study examines the impact of China’s CERT pilot policy on quota-managed firms’ green innovation. The results show that the policy primarily stimulates substantive green innovation, reflected in green invention patents, with limited influence on strategic, low-novelty patents. Its effects are stronger for firms in central and western pilot regions, in non-high-tech industries, and at more mature stages of development, and differ between firms that anticipated regulation and those brought under quota management unexpectedly. Overall, the findings indicate that a well-designed carbon trading mechanism can reallocate resources to incentivize high-quality green innovation, offering micro-level support for Coasian market-based approaches to environmental externalities and informing the further development of China’s national carbon market.

AB - Global warming threatens sustainable human development, and carbon emission rights trading (CERT) has emerged as a key market-based tool for reducing emissions. Yet evidence on how CERT affects corporate green innovation—especially high-quality, substantive innovation—remains mixed and fragmented. Using unbalanced panel data on Chinese A-share listed firms from 2007 to 2016 and applying fixed-effect, DID, and PSM-DID models, this study examines the impact of China’s CERT pilot policy on quota-managed firms’ green innovation. The results show that the policy primarily stimulates substantive green innovation, reflected in green invention patents, with limited influence on strategic, low-novelty patents. Its effects are stronger for firms in central and western pilot regions, in non-high-tech industries, and at more mature stages of development, and differ between firms that anticipated regulation and those brought under quota management unexpectedly. Overall, the findings indicate that a well-designed carbon trading mechanism can reallocate resources to incentivize high-quality green innovation, offering micro-level support for Coasian market-based approaches to environmental externalities and informing the further development of China’s national carbon market.

KW - carbon emission trading pilot

KW - corporate innovation

KW - green innovation

KW - low-carbon economy

UR - https://www.scopus.com/pages/publications/105030111681

U2 - 10.3390/su18031207

DO - 10.3390/su18031207

M3 - Journal Article (refereed)

SN - 2071-1050

VL - 18

JO - Sustainability

JF - Sustainability

IS - 3

M1 - 1207

ER -

The Effects of Carbon Emission Rights Trading Pilot Policy on Corporate Green Innovation: Evidence from PSM-DID and Policy Insights

Abstract

Bibliographical note

UN SDGs

Keywords

Access to Document

Other files and links

Fingerprint

Cite this