Effect of carbon information disclosure with consistent evaluation standards: An empirical study about carbon efficiency label in Huzhou China

Abstract

Company carbon information disclosure (CID) has attracted increased attention in the context of global climate change and CO2 emissions reduction. Existing CID projects have seldom included consistent carbon information evaluation standards for assessing companies’ carbon performance, causing uncertainty in their effects on CO2 emissions reduction. A sharp regression discontinuity design is developed in this study, and the effects and mechanism of the carbon efficiency label (CEL) are investigated as the first CID project with consistent evaluation standards in China. Semi-structured interviews are conducted with managers of 19 companies to interpret the empirical results. We find that the CEL substantially reduced CO2 emissions from high-carbon-intensity companies of heavily regulated industries, such as the cement and chemical fiber industries. This result suggests that the CEL may address the problem of “whipping the fast and hardworking” in industrial-level environmental regulations. The reason is that the consistent evaluation standards of the CEL enable the accurate assessment of companies’ carbon information, preventing asymmetric information between government and companies. Additionally, the CEL’s deterrent effect is an important mechanism for CO2 emissions reduction. An essential factor affecting the CEL’s deterrent effect is the desire of companies to maintain dispositional legitimacy for administrative approval of energy and environmental assessments.