Green innovation, clean energy, and emission trading policy: evidence from quasi-natural experiments

Abstract

ABSTRACT This paper constructs a unique dataset of clean energy and collects firm-level green innovation data that matches it with provinces and cities. Then, this paper executes quasi-natural experiments on green innovation to examine the effects of China's emission trading policy on green innovation. Further, this paper introduces the interactive terms of the pilot time and pilot area dummy variables into the spatial Durbin model (SDM) and spatial dynamic panel model (SDPM) to construct quasi-natural experiments to examine the spatial effect. The findings confirm a negative association between the ‘policy treatment effect’ and green innovation. The results also indicate a significant negative association between the emissions trading policy and clean energy. Besides, the empirical results reveal a positive correlation between clean energy and green innovation; clean energy promotes green innovation in the region and the surrounding areas. This paper complements existing research and provides empirical evidence and policy implications for developing clean energy, promoting green innovation, and improving the emission trading policy.