Can carbon trading policies promote regional green innovation efficiency? Empirical data from pilot regions in China

Abstract

Although the emission reduction and innovation effects of carbon emissions trading have attracted considerable interest among academics and policy makers, there is a lack of empirical research on how carbon trading pilots in China promote regional green innovation. Therefore, we measured the green innovation efficiency of 30 provinces and cities in mainland China from 2005 to 2018, using selected panel data within a super-efficient SBM model that incorporated undesirable outputs. We used a double differential model to evaluate the impacts of carbon trading policies on the green innovation efficiency of seven carbon trading pilot regions. These impacts were confirmed using the double differential propensity score matching method. Our findings were as follows. (1) The implementation of carbon trading policies has a significant and continuous effect of promoting and improving green innovation efficiency in the pilot areas. (2) Carbon trading induces technological innovation effects, enabling green innovation potential to be realized. Regional green innovation efficiency is further improved through energy substitution and structural upgrading effects and subsequently through all three of the above effects. (3) The synergy between the three major effects of carbon trading policies amplifies regional green innovation efficiency. Therefore, the Chinese government should accelerate its efforts to develop and improve carbon markets, promote carbon trading policies, and actively foster synergy among the three effects to achieve green and sustainable regional development.