The policy evaluation of China's carbon emissions trading scheme on firm employment: A channel from industrial automation

Abstract

The debate between pollution reduction and job creation has been a relevant and practical topic, with ambiguous conclusions and expectations. This paper studies the impact of market-based environmental regulation on enterprise employment, taking the quasi-natural experiment of China's carbon emissions trading scheme (CETS). We develop the two-way fixed effects difference-in-differences method to evaluate the employment effect of the CETS, and use the data of listed companies in the manufacturing industry from 2011 to 2019 to provide evidence from China. We observe robust evidence that the CETS significantly expands the employment scale of cities and enterprises on the premise of achieving emission reductions, and that the employment promotion effect of the CETS on enterprises is driven by the application of robots. The output scale effect and productivity effect of robots promote employment, while the factor substitution effect inhibits employment, and the former is greater than the latter. Furthermore, robot application is complementary to low-skilled labor, but substitutes for medium-skilled labor.