China’s Carbon Emission Trading Scheme and Firm Performance

ABSTRACT

We empirically investigate the effect of emissions trading scheme (ETS) on the corporate performance of Chinese listed firms from 2010 to 2016, treating China’s pilot ETS as a quasi-natural experiment. Our difference-in-differences analysis shows that the ETS is significantly correlated with corporate performance of high-energy-consuming firms. While the policy effect strengthens in the first few years and then weakens by 2016. This indicates that ETS cannot sustainably and steadily affect the corporate performance. Finally, we find that ETS has a stronger impact on the performance of high-energy-consuming firms in regions with high governmental intervention and an underdeveloped legal system.

KEYWORDS:

• Carbon emission trading scheme
• China’s pilot ETS
• corporate value
• difference-in-differences model

JEL:

• M21
• O12
• Q25
• Q43

Declaration Of Interest

The authors declare no conflict of interest.

Notes

1. The data source is The Global Carbon Project obtained via Climate Watch, an online platform managed by the World Resources Institute dedicated to providing open climate data. https://www.climatewatchdata.org.

2. To identify the high-energy-consuming firms, this study refers to the classification of six high-energy-consuming industries in the “2010 National Economic and Social Development Statistical Bulletin”. These industries are: electricity and heat production and supply; nonmetallic mineral products; ferrous metal smelting and rolling processing; chemical raw materials and chemical products manufacturing; petroleum processing coking and nuclear fuel processing; and non-ferrous metal smelting and rolling processing.

Additional information

Funding

This work was supported by the National Social Science Foundation of China [grant number 20BGL196]; Shanghai Municipal Education Commission [grant number 16SG51], Humanities and Social Sciences Research Planning Fund Project by Ministry of Education of China [grant number 17YJC790081], and the Shanghai High-level University Development Project.