The Policy Impact of Carbon Emission Trading on Building Enterprises’ Total Factor Productivity in China

Abstract

Nearly 40 percent of worldwide energy and process-related CO2 emissions are produced by the construction sector. China’s construction industry is the largest in the world, with Chinese construction enterprises completing a total output value of RMB 26.39 trillion in 2020; these buildings contribute to about 20 percent of China’s overall carbon emissions and 20 percent of the global total emissions. There is an urgent need to prove whether construction enterprises are benefiting from the carbon trading policy. Compared to the traditional method, a double difference model can be used to highlight the consequences of different states of construction enterprises’ responses to carbon trading regimes. In this study, we examine the following results based on cross-sectional data collected from 2006 to 2021, from listed construction enterprises: (1) Existing carbon emission policies have had a significant impact on the improvement of construction enterprises’ total factor productivity. This improvement is more pronounced in large state-owned enterprises in particular. (2) Construction enterprises’ greater involvement in carbon trading income is most strongly influenced by their green innovation level. (3) Construction enterprises located in eastern and central China benefit significantly from carbon trading, but construction enterprises based in the west do not. The research result indicates that future incentive initiatives should pay more attention to western regions and privately owned building enterprises. The leading role of large state-owned building enterprises should be reinforced.