Keywords
Carbon quotas
Total factor productivity
High-quality development
Submitted : 2026-05-17
Accepted : 2026-06-01
Published : 2026-06-16
Abstract
As China advances its green transition, increasing attention has been paid to whether carbon emissions trading policies can improve both environmental performance and economic efficiency. Using panel data for Chinese listed companies from 2010 to 2024, this study applies a multi-period difference-in-differences (DID) model to examine the effect of the carbon emissions trading system on firms’ total factor productivity (TFP). The results indicate that the carbon trading policy is associated with a significant increase in enterprise TFP. Further analysis shows that different policy arrangements during quota accounting, quota allocation, and quota trading affect firms in different ways. In particular, baseline-based accounting methods, paid quota allocation, and higher carbon prices are found to have positive effects on TFP. The heterogeneity analysis further suggests that the positive effect of the carbon trading policy is more evident among non-state-owned enterprises and firms outside high-carbon and heavily polluting industries.
References
Xi JP, 2022, Hold High the Great Banner of Socialism with Chinese Characteristics and Strive in Unity to Build a Modern Socialist Country in All Respects: Report to the 20th National Congress of the Communist Party of China, People’s Publishing House, Beijing.
Jiang J, Xie D, Ye B, et al., 2016, Research on China’s Cap-and-Trade Carbon Emission Trading Scheme: Overview and Outlook. Applied Energy, 178: 902–917.
National People’s Congress of the People’s Republic of China, 2026, Ecological and Environmental Code of the People’s Republic of China, Law Press China, Beijing.
Cai F, 2013, How China’s Economic Growth Shifts to Total Factor Productivity-Driven. Social Sciences in China, (01): 56–71 + 206.
Zhang CJ, Li, ZW, Zhou Y, 2021, Can Carbon Emission Trading Pilot Policies Achieve Regional Emission Reduction? Soft Science, 35(10): 93–99.
Zhang C, Shi D, Li PF, 2017, Potential Effects of Implementing Inter-Provincial Carbon Emission Trading in China. Finance & Trade Economics, 38(02): 93–108.
Shen HT, Huang N, 2019, Can Carbon Emission Trading Mechanisms Improve Corporate Value? Finance & Trade Economics, 40(01): 144–161.
Guo BN, Feng Y, Zhang H, 2023, Impact of Carbon Emission Trading on Corporate Total Factor Productivity and Its Spillover Effects: Based on the Empirical Analysis of Spatial Difference-in-Differences Model. China Environmental Management, 15(03): 84–92.
Wei XN, Sun CW, 2023, Can Exiting Government Subsidies and Improving Corporate Economic Performance Coexist? Based on the Quasi-Natural Experiment of Carbon Emission Trading Pilots. Statistical Research, 40(10): 16–29.
Wang P, Huang S, Wang Y, et al., 2023, Research on the Impact of Carbon Emission Trading on Corporate Carbon Performance. Technology Management Research, 44(12): 158–169.
Zhang J, Wang KQ, Zhang Y, 2022, Emission Reduction Effect of Carbon Emission Trading Mechanism: Based on the Mediating Effect of Low-Carbon Technological Innovation. Soft Science, 36(05): 102–108.
Cao X, Qiu L, 2026, “Substantive Adjustment” or “Strategic Response”: Carbon Emission Trading Policy and Corporate Strategic Change. Collected Essays on Finance and Economics, 1–16.
Ambec S, Cohen AM, Elgie S, et al., 2013, The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness? Review of Environmental Economics and Policy, 7(1): 2–22.
Tang WQ, Wu LB, Qian HQ, 2016, From “Pollution Haven” to Green Growth: Research On the Regulatory Mechanism of Inter-Regional Transfer of High Energy-Consuming Industries. Economic Research Journal, 51(06): 58–70.
Langenmayr D, Simmler M, 2024, JUE Insight: Expectations about Future Tax Rates and Firm Entry. Journal of Urban Economics, 142: 103666.
Wu SM, 2009, Analysis of the Determinants of Entry and Exit of Chinese Manufacturing Firms. Industrial Economics Research, (04): 14–19 + 60.
Hu J, Fang Q, Long WB, 2023, Carbon Emission Regulation, Corporate Emission Reduction Incentives, and Total Factor Productivity: Based on a Natural Experiment of China’s Carbon Emission Trading Mechanism. Economic Research Journal, 58(04): 77–94.
Shen HT, Huang N, 2019, Can Carbon Emission Trading Mechanisms Improve Corporate Value? Finance & Trade Economics, 40(01): 144–161.
Qin JQ, Shao XJ, 2015, Cross-Listing, Government Intervention, and Capital Allocation Efficiency. Economic Research Journal, 50(06): 117–130.
Shive AS, Forster MM, 2020, Corporate Governance and Pollution Externalities of Public and Private Firms. The Review of Financial Studies, 33(3): 1296–1330.
Chen Q, Qi J, Yan GP, 2025, Placebo Tests in Difference-in-Differences: A Practical Guide. Management World, 41(02): 181–220.
Cao X, Su XE, 2023, Has the Carbon Emission Trading Pilot Policy Promoted Carbon-Neutral Technological Innovation? China Population, Resources and Environment, 33(07): 94–104.
Song DY, Zhu WB, Wang BB, 2021, Micro-Empirical Evidence of Covered Enterprises in China’s Carbon Trading Pilots: Carbon Emission Trading, Quota Allocation Methods, and Corporate Green Innovation. China Population, Resources and Environment, 31(01): 37–47.
Fischer C, Fox KA, 2007, Output-Based Allocation of Emissions Permits for Mitigating Tax and Trade Interactions. Land Economics, 83(4): 575–599.
Fan D, Fu JW, Wang WG, 2022, How Does Carbon Emission Trading Affect Corporate Total Factor Productivity? Systems Engineering: Theory & Practice, 42(03): 591–603.
Xie HZ, 2022, The Impact of Environmental Protection Tax on Corporate Capacity Utilization, dissertation, Southwestern University of Finance and Economics.
Tang MG, Chen SL, Gao WQ, et al., 2022, Effects of Carbon Emission Trading on Companies’ Market Value: Evidence from Listed Companies in China. Atmosphere, 13(2): 240.
Liu YC, Yang T, 2025, How Carbon Emission Trading Policy Affects Corporate Total Factor Productivity: A Study from the Perspective of Digital Transformation. Journal of Weinan Normal University, 40(11): 64–78.