Urban Green Innovation and the Export of Low‐Carbon Products by Firms in Emerging Markets: Evidence From Chinese Manufacturing Firms

Abstract

ABSTRACTGiven the backdrop of global warming and the rise of more stringent green trade barriers, such as the Carbon Border Adjustment Mechanism, we utilize data from firms in the world's largest emerging market to theoretically analyze and empirically test the effects of urban green innovation on the export of low‐carbon products by firms. First, urban green innovation significantly boosts the export of low‐carbon products by firms. Second, our analysis of the mechanisms shows that urban green innovation enhances firms' export of low‐carbon products by lowering production costs, easing internal financing constraints, and helping them navigate green trade barriers in host countries. Third, urban green innovation contributes simultaneously to reducing firms' energy consumption and pollution emissions, and it plays a significant role in expanding the export variety of low‐carbon products by firms, as well as increasing the number of host countries they serve. Our heterogeneity analysis reveals that the more differentiated the low‐carbon products, the greater the impact of urban green innovation. Moreover, urban green innovation has a more significant effect on promoting the export of low‐carbon products by non–state‐owned firms compared to state‐owned ones.