Policy spillover effect and action mechanism for environmental rights trading on green innovation: Evidence from China's carbon emissions trading policy

Abstract

Under the dual pressures of carbon emissions reduction targets and high-quality economic development, environmental rights trading was widely used to promote win-win situation between economy and environment. Taking China's carbon emissions trading policy (CETP) as the research object, and based on 2008 to 2017 panel data from Chinese provinces, this study employed a spatial difference-in-differences (SDID) model based on an endogenous spatio-temporal weight matrix to explore the direct incentive and spatial spillover effects of CETP on green innovation (GI). It was found that the CETP promoted GI in the pilot areas, and the policy spillover effect stimulated GI in neighboring provinces through innovative growth poles, which was conducive to the overall reduction of carbon emissions. The study also found that the GI effectiveness was heterogeneous due to the differences in the innovation growth pole life cycle. The Beijing Tianjin Innovative Growth Pole (BTIP) was found to have a GI polarizing effect on the neighboring regions, the Shanghai Innovative Growth Pole (SIP) and the Hubei Chongqing Innovative Growth Pole (HCIP) had a GI diffusion effect on the neighboring regions, and the Guangdong Innovative Growth Pole (GIP) developed towards the interactive effect stage, at which time the CETP no longer played a significant role in promoting provincial or neighboring provincial GI. Finally, the action test mechanism found that the government competition (GC) and its interaction with the market competition (MC) both enhanced the polarization effect of the innovation growth poles, and therefore seriously hindered the CETP spillover effect on GI. Based on these findings, rich experience is provided for CETP promotion and application, which is expected to provide the policy basis for achieving carbon peak and carbon neutrality targets.