Carbon Reduction, Pollution Intensity, and Firms’ Ratios of Value Added in Exports: Evidence from China’s Low-Carbon Pilot Policy

Abstract

Global warming is highlighting the importance of carbon emission reduction, while firms in developing countries are facing the dual challenges of carbon reduction and exporting real gains improvement. Using the Chinese Customs Transaction-level Trade Statistics Dataset and the Chinese Annual Survey of Industrial Firms Dataset from 2008 to 2014, we identified the impact of China’s Low-carbon Pilot Policy (LCPP) on firms’ ratios of the domestic value added in exports for the first time by adopting a difference-in-difference method. Our findings show that China’s LCPP continuously improves firms’ ratios of value added in exports, providing empirical evidence for the topic of whether carbon reduction regulations affect firms’ export real gains. The heterogeneity analysis shows that the improvement impact of LCPP on dirty firms is weaker than that on clean firms. The mechanism test also shows that firms’ production efficiency plays the role of partial intermediary in the relationship between LCPP and firms’ ratios of domestic value added in exports. Our research extends the micro effect of LCPP to the field of exporting real gains, and enriches the research on influencing factors of firms’ ratios of the domestic value added in exports.