Is the carbon emissions trading system conducive to the urban green technology innovation level? Evidence from China

Abstract

Although the academic community has come to accept the Carbon Emissions Trading Scheme (CETS) as a viable market incentive for environmental control, more research is needed to determine if the creation of such a scheme can spur the development of green technologies. Based on the panel data of 274 Chinese cities from 2010 to 2017, this paper uses the propensity score matching-difference in difference (PSM-DID) method to empirically test the green innovation effect of the pilot areas relative to the non-pilot areas before and after the implementation of the policy, uses the mediating effect model and the moderating effect model to test its internal influence mechanism, and further examines the heterogeneity of the policy effects. The findings indicate that pilot CETS deployment can significantly improve green technology innovation (GTI), and the conclusion is still valid after a series of robustness tests. Moreover, the human capital input and the science and technology support have a significant partial mediating effect in the policy effect of CETS on GTI, with the latter contributing greatly. The overall marketization and the financial development positively moderate the impact of CETS on GTI, but government involvement have a reverse moderating effect. In addition, the policy effects is better in cities with higher administrative levels in China and in cities in eastern and western China, while the policy effects in cities with lower administrative levels and in central China is weak or not significant. This study has far-reaching theoretical value and momentous practical significance for China and other developing countries in terms of further deepening and improving the CETS, enhancing GTI, and promoting urban sustainable development.