Market-based Environmental Regulation Research Articles

Do Market-Based Environmental Regulations Promote Green Development? A Quasi-Natural Experiment Based on Carbon Emissions Trading Pilot of China

ABSTRACT Using panel data of 30 Chinese provinces from 2008 to 2019, we utilized the Super-efficiency SBM-DEA model to estimate green development efficiency (GDE) and analyzed the impact of carbon emissions trading scheme (ETS) on GDE via the DID model. Our findings indicate that ETS significantly reduces carbon emissions and enhances GDE. Further analysis reveals a time lag and regional heterogeneity, with effects becoming more pronounced three years later, particularly in the developed eastern regions. Additionally, the mediating effect test suggests that green technology innovation (GTI), notably green patents, serves as a vital conduit for ETS to bolster GDE.

The Unintended Consequence of Environmental Regulations on Earnings Management: Evidence from Emissions Trading Scheme in China

This study extends the existing research on the impact of environmental regulations from an earnings management perspective. Using the difference-in-differences approach, the study contributes to the understanding of the relationship between corporate earnings management and the implementation of China’s carbon emissions trading program. In particular, the study finds a positive relationship between corporate earnings management and the implementation of China’s carbon emissions trading program. Furthermore, our analysis reveals that this positive correlation is much stronger for firms facing tighter financial constraints, higher information opacity, less intense competition, and higher pressure to reduce emissions. These findings illustrate the unintended consequences of market-based environmental regulations and provide new evidence for assessing the efficiency of much-promoted market-based environmental regulations.

Boosting green technology innovation in China's construction industry: The power of energy-consuming rights trading policy

Despite the energy-consuming rights trading (ECRT) as a policy practice to achieve the Sustainable Development Goals (SDGs), the existing literature has not yet clearly revealed how it affects green technology innovation in the construction industry. Based on the panel data of 30 provincial-level administrative regions in China from 2010 to 2021, this paper empirically examines the impact and mechanism of the pilot ECRT policy on green technology innovation in the construction industry using the difference-in-differences (DID) method. The study shows that the ECRT policy significantly enhances green technology innovation in the construction industry in the pilot areas. Specifically, the level of green technological innovation in the construction industry in the pilot areas increased by 23.2 % after the implementation of the ECRT policy. Further mechanistic tests show that the ECRT policy promotes green technological innovation in the construction industry by increasing research and development (R&D) investment and upgrading the industrial structure. This paper assesses for the first time the impact of the ECRT policy on green technology innovation from the construction industry's perspective, providing a new perspective for assessing the impact of market-based environmental regulation. This paper is also highly significant for the government to enhance its policies on energy saving and pollution reduction.

Patterns of environmental regulation and green innovation in China

Green technology innovation is an important means to achieve sustainable development. The study is an exploration of the bilateral perspective on the relationship between different types of environmental regulations and green innovation. Based on the data set of 30 provinces in China from 2006 to 2018, the two-sided effects of command-and-control environmental regulation and market-based environmental regulation on green innovation are analysed and the net effects are calculated by using the two-tier stochastic frontier models. First, empirical research shows that the effects of command-and-control environmental regulation and market-based environmental regulation on green innovation are both highlighted by negative characteristics. Command-and-control environmental regulation has a smaller effect on green innovation, with an average positive effect of 0.00005, which is smaller than the average negative effect of 0.0008. Meanwhile, the positive effect of market-based environmental regulation on green innovation is 0.00291, smaller than the negative effect of 0.00461. Second, the negative impact of command-and-control environmental regulation on green innovation underwent a "back-to-N" change process in 2006–2018, while the negative effect of market-based environmental regulation on green innovation did not decline until after 2011. Third, the provinces where command-and-control environmental regulation policies have a greater negative effect are concentrated in the energy-intensive regions of central and western China, while the provinces where market-based environmental regulation policies can promote green innovation are from the energy-intensive or developed eastern regions of China. Based on the research conclusions, to better promote green innovation, there is a need to implement environmental regulatory policies that address regional differences and to establish a national system of green innovation markets.

The Impact of the Digital Economy on Provincial Carbon Productivity: Empirical Evidence from China

With the introduction of the dual carbon goals of “carbon peak” and “carbon neutrality”, low-carbon economic development has become the focus of attention for all sectors in China. Improving carbon productivity (CP) is the key to developing a low-carbon economy and is essential to achieving carbon emission reduction and economic growth. The rapid development of the digital economy (DE) provides a new breakthrough for improving carbon productivity, but there are few studies on the digital economy and carbon productivity in the existing literatures. We empirically investigate the impact mechanism of the digital economy on provincial carbon productivity using China’s provincial panel data from 2010 to 2019. This study finds that the digital economy significantly raises provincial carbon productivity; this result remains valid after a series of robustness tests. The digital economy can impact provincial carbon productivity through both energy consumption structure (ECS) and green technology innovation (GTI) and can contribute to the improvement of provincial carbon productivity by optimizing energy consumption structure and improving green technology innovation. In addition, different environmental regulations have different impacts. Command-and-control environmental regulation (CER) weakens the positive impact of the digital economy on provincial carbon productivity, whereas market-based environmental regulation (MER) enhances the positive impact of the digital economy on provincial carbon productivity. This study extends the research on the digital economy in the field of low-carbon development, providing insights and policy suggestions for relevant departments to promote low-carbon development from the perspective of the digital economy.

The Impact of Heterogeneous Environmental Regulation Tools on Economic Growth: Can Environmental Protection and Economic Growth Be Win-Win?

This paper explores the relationship between economic growth and environmental regulation using panel data for 30 provinces in China from 2009–2021 using the fixed effects model and the threshold model. First, the baseline regression results show that market-based environmental regulation promotes economic growth. However, command-and-control environmental regulation in China can not promote China’s economic growth. Second, further research has shown that environmental regulation’s role in promoting the economy is constrained by the intensity of environmental regulation. Market-based environmental regulation is only able to promote economic growth when the intensity is low. If the intensity of market-based environmental regulation is too high, market-based environmental regulation, on the contrary, can not promote economic growth. Third, The impact of market-based environmental regulation on economic growth also is found to be constrained by the level of economic development: market-based environmental regulation does not promote economic growth when the economy is less developed. It is only when the economy has reached a high level that market-based environmental regulation will contribute to economic growth. Finally, this paper finds that financial development and market-based environmental regulation can synergize to promote economic growth.

Can Market-Based Environmental Regulation Inhibit the Industrial Water Pollution?

Can Market-Based Environmental Regulation Inhibit the Industrial Water Pollution?

How Environmental Regulation Affects Pollution Reduction and Carbon Reduction Synergies—An Empirical Analysis Based on Chinese Provincial Data

Faced with the dual challenges of environmental pollution and climate change, it is of great significance to study the impact of relevant environmental regulations on the synergistic effect of pollution reduction and carbon emission reduction and their influence mechanisms. Based on a theoretical analysis using the panel data of 30 provinces in China, a spatial econometric model and an intermediary effect model are used to investigate the impact of environmental regulations on the synergistic effect of pollution reduction and carbon reduction and the transmission mechanisms potentially responsible for these effects. The empirical results show the following: (1) The three kinds of environmental regulation effectively facilitate the synergistic effect of pollution reduction and carbon reduction, taking the following order when ranked according to the intensity of their effects: command-type environmental regulation (ER1) > market-based environmental regulation (ER2) > voluntary environmental regulation (ER3). (2) Environmental regulation effectively promotes the synergistic effect of pollution and carbon reduction through the three transmission mechanisms of stimulating technological innovation (TI), industrial structure upgrading (ISU), and restricting foreign direct investment (FDI), which take the following effectiveness order: TI > FDI > ISU. Based on the results of the study, policy suggestions to facilitate pollution reduction and carbon synergies are proposed to help China’s green and low-carbon development.

The Effect of Market-Based Environmental Regulations on Green Technology Innovation—The Regulatory Effect Based on Corporate Social Responsibility

This study explores the impact of market-based environmental regulations on green technological innovation and the differential regulatory effects of corporate social responsibility (CSR) on different levels of green technological innovation. By analyzing data from 746 Chinese A-share listed companies from the period of 2008–2021, this paper examines the effect of market-based environmental regulations on corporate green technology innovation. The research findings are as follows: (1) Market-based environmental regulations have a significant promoting effect on green technology innovation in enterprises. (2) CSR amplifies the positive influence of market-based environmental on green technological innovation, but it has a greater impact on strategic innovations, like utility model patents, rather than substantial ones, like invention patents. Corporate may use CSR to superficially meet regulatory pressures and stakeholder expectations, focusing more on short-term compliance than on long-term sustainable innovation. Companies might utilize CSR as a superficial means to appease regulatory demands, concentrating on immediate compliance rather than fostering enduring innovation. (3) Market-based environmental regulations facilitate green technological innovation by alleviating enterprise financing constraints and improving the efficiency of innovation resource allocation. (4) The promotion effect of market-based environmental regulations on green technological innovation is particularly evident in state-owned enterprises, heavily polluted industries, and regions with high regulatory levels. The research contribution is to provide valuable insights into the implementation of market-based environmental regulations and firms’ green technological innovation. Specifically, it elucidates the nuanced regulatory effects of corporate social responsibility, presenting a fresh lens through which to reconsider the intricate mechanism of CSR’s role as a conduit between environmental policy and innovative practices.

The influence of carbon emission trading on the optimization of regional energy structure

The optimization of the energy structure is a crucial element in the development of green and low-carbon economies and societies. Market-based environmental regulations, such as carbon emissions trading, play a significant role in facilitating this transition. This study analyzes panel data from 30 provinces in China from 2007 to 2020. It empirically examines the impact and mechanism of carbon emissions trading pilot schemes on the transformation of energy consumption structure at the macro level, using the difference-in-differences method. The research findings indicate that provinces with carbon emissions trading pilots have experienced significant reductions in carbon emissions and carbon intensity, demonstrating clear emission reduction effects. Additionally, the transformation process of energy consumption structure has been notably accelerated, highlighting the correlation between initial carbon emissions trading and the regional energy utilization framework. Furthermore, in our extended mechanism analysis, we introduce two new variables - green finance and environmental regulation. Our analysis reveals that the level of green finance in carbon emissions trading pilot provinces significantly influences the degree of carbon emissions in these areas. Additionally, environmental regulation has a significant positive impact on the optimization of energy consumption structure.

Evaluation of the benefits of tradable peak energy use rights products

Environmental degradation and energy security issues require our country to accelerate the transition of its energy consumption structure towards decarbonization. Clarifying the impact of the pilot trading system of peak energy use rights products on the low-carbon transformation of energy consumption structure and the path of its effect is an important policy revelation for the construction of market-based environmental rights and interests regulation. In this paper, we study the implementation effect of the pilot provinces of peak energy use right product trading from the perspective of carbon emission reduction benefit and analyze the carbon emission reduction benefit generated by the peak energy use right product according to the pilot trading situation.

The impacts of different environmental regulations on firm’s performance in China based on R&D investment, environmental innovation and non-environmental innovation

ABSTRACT Emission standard, as a kind of mandatory environmental regulation, stipulates the emission standard of pollutants. The emission trading system (ETS) is regarded as a typical market-based environmental regulation. This study examines the impacts of mandatory environmental regulation (SO2 emission standard) and market-based environmental regulation (SO2 ETS) on firm performance in China. Listed firms in China are selected as research samples and a difference-in-differences (DID) model is employed as an assessment method. The results indicate that mandatory environmental regulation only has a significantly positive impact on environmental performance. However, the ETS improves environmental performance and economic performance simultaneously. This study further explores the effect mechanisms between two environmental regulations and firm performance that R&D investment, environmental innovation and non-environmental innovation are selected as different effect mechanisms. There are no impacts of mandatory environmental regulation on R&D investment and environmental innovation. However, it finds that the ETS can effectively decrease the crowding-out effect of R&D and thus trigger environmental innovation of the firm. According to heterogeneity analysis, the effect of market-based environmental regulation is significant in those regions with higher intensity of environmental regulation. It does not find significant effects of mandatory environmental regulation and market-based environmental regulation in regions with lower regulatory intensity.

Environmental regulations, finance, and firm environmental investments: an empirical exploration

Environmental regulations (ERs) drive financial decisions, influencing firms to invest in sustainable practices. Balancing economic goals with eco-friendly initiatives is pivotal in today's business landscape. This study investigates the intricate relationship between ERs, and firms’ environmental investments, focusing on the nuances of command-based and market-based ERs. With the backdrop of China's rapid economic growth and its subsequent environmental challenges, this research aims to shed light on how ERs influence firms’ environmental investments and innovative practices while considering the role of Financial Constraints (FCs). The study empirically examines the interplay of these factors using a comprehensive dataset of listed companies in China. The study utilizes 750 observations from the China Environmental Statistical Yearbook (2019-2020) and investigates the relationship between ER, finance, and firm environmental (FE) investments in diverse Chinese industries and regions. The study utilized diverse statistical methods, baseline, mediating effect, robustness tests, and linear regression to analyze China's environmental data, emphasizing descriptive analysis. The theoretical contribution of this study is that highlighting regulatory pressure fosters financial gains, driving firms to invest in environmental initiatives for long-term profitability proactively. These findings underscore the significance of taking into financial dynamics while creating and implementing ER. Policymakers should focus on mechanisms that enhance firms’ access to funding, such as promoting transparency through environmental and social responsibility reporting.

The impact of market-based environmental regulation on corporate ESG performance: A quasi-natural experiment based on China's carbon emission trading scheme

At present, there are few studies exploring the impact of market-based environmental regulation on ESG performance based on the perspective of carbon emission trading scheme (CETS). This paper aims to supplement this research field through empirical analysis. Taking Shanghai-Shenzhen A-share listed companies from 2012 to 2022 as the research object, this paper studies the impact of CETS, a market-based environmental regulation tool, on the ESG performance of enterprises by constructing a time-varying DID model and examines the mediating roles of green technology innovation, agency cost and analyst attention. The results show that the implementation of CETS can significantly boost ESG performance, and green technology innovation, agency cost, and analyst attention play a partial intermediary role between the two, while the mediating effects of green total factor productivity and green total factor energy efficiency are not significant. In terms of heterogeneity analysis, the study shows that CETS implementation has a more substantial promotion effect on ESG performance in non-state-owned enterprises, non-politically connected enterprises and non-high-tech enterprises. In this paper, the robustness test was carried out through PSM-DID, placebo test and replacement of explained variables, and the test results further supported the hypothesis in this paper. This study enriched the research on the impact of market-based environmental regulation on ESG from the perspective of CETS. It provided enlightenment for enterprises to improve ESG performance to a strategic level, improve the level of green technology innovation, and the government to implement differentiated environmental governance policies.

Political incentives in market-based environmental regulation: Evidence from China’s carbon emissions trading scheme

This paper used a multi-period DID model with panel data from 283 Chinese cities between 2006 and 2019 to investigate the emission reduction effects and mechanisms of China's carbon trading scheme. The research revealed that China's Carbon Emissions Trading Scheme not only stimulated businesses to reduce emissions as a market-based environmental regulation policy but also influenced local governments' governance objectives. As a result, the Hawthorne effect inevitably manifested during the experimental period of China's Carbon Emissions Trading Scheme. Further analysis indicated that China's CETS encouraged local authorities to take a more proactive stance towards the balance between environmental preservation and economic growth, aiming to achieve a mutually beneficial outcome. Based on the political stance of local governments, they are likely to simultaneously increase their focus on both economic growth and environmental protection. However, when faced with the conflict between economic advancement and environmental safeguarding, pilot regions prioritized ecological conservation in their practical steps, leading to a modest decline in economic growth. In other words, the government's high-profile announcements may not always manifest in actual deeds. In practice, local authorities tend to allocate more administrative resources to areas highly prioritized by the central government. Furthermore, the extended analysis reveals that China's CETS has resulted in a reduction in social welfare due to a shift in governance priorities influenced by political incentives. Therefore, fine-tuning the performance evaluation mechanism, preventing any bias towards the target preferences of local authorities, and guaranteeing the successful operation of the market mechanism are imperative to achieve truly low-cost and sustainable emissions reductions objectives for CETS.

The Role of Industrial Structure in the Impact of Environmental Regulation on Carbon Productivity

In the context of global climate change, China has proposed the "Carbon peaking and Carbon neutrality goals" goal of carbon emissions will reach carbon peak by 2030 and carbon neutral by 2060. As a market-based environmental regulation policy to promote greenhouse gas emission reduction, carbon emission trading policy is expected to reduce carbon emissions and improve carbon productivity, among which industrial structure plays a regulatory role in the impact of carbon emission trading policy on carbon productivity. Using the provincial data of China from 2006 to 2019, this paper evaluated the influence of carbon emission trading policy on carbon emission, taking the industrial structure as the regulating variable, studied the industrial structure in the influence of environmental regulation on carbon emission, and tested the regression results of DID model through parallel trend test, placebo test and PSM-DID model regression. After the above research process, the following conclusions are drawn: the carbon emission trading policy has a significant positive promotion effect on carbon emission reduction, and it is further concluded that the industrial structure has a significant negative regulatory effect on carbon productivity under the carbon emission trading policy.

Faking for fortune: Emissions trading schemes and corporate greenwashing in China

Market-based environmental regulations are pivotal in facilitating the reduction of emissions. This paper employs a staggered difference-in-differences (DID) strategy to investigate the impact of Emissions Trading Schemes (ETS) on corporate greenwashing behavior. The findings suggest that ETS act as a catalyst for corporate greenwashing by intensifying financial distress, as demonstrated that the effect is notably more substantial among firms with heightened financing constraints and greater performance volatility. Further analysis reveals that corporate greenwashing behavior induced by ETS is more pronounced where market competition is higher, firms are smaller, R&D investment is lower, or intensity of environmental regulation is lower. This paper provides valuable insights for understanding the comprehensive picture of ETS.

THE INFLUENCE OF FIRM KNOWLEDGE CHARACTERISTICS ON TECHNOLOGICAL INNOVATION: A MULTILEVEL NETWORK STRUCTURE PERSPECTIVE

As a necessary informal system, media attention plays a supervisory role in the implementation of formal systems such as environmental regulations, which is an important force to enhance enterprises' green technology innovation. This paper takes listed companies in heavily polluting industries in China's A-share market as the research object, selects data from 2008 to 2017, and establishes a hierarchical regression model to explore the influence of media attention and environmental regulation on enterprises' green technology innovation. The results show: (1) there is a significant positive correlation between media attention and green technology innovation; (2) command-based and market-based environmental regulations positively regulate the relationship between media attention and green technology innovation for enterprises. This paper argues that media attention plays a role in external supervision and governance, stimulating enterprises' green technology innovation behavior. Therefore, we should actively utilize media attention in corporate environmental governance and gradually strengthen both command-based and market-based environmental regulations.

Collectivist culture, environmental regulation and pollution emissions: evidence from China.

Collectivist culture serves as a significant cultural foundation in China. It could, to some extent, shape public attitudes toward the environment and thus influence the implementation of related policies. To examine this hypothesis, this study constructs the collectivist culture intensity index for 25 Chinese provinces spanning from 2010 to 2020. Through a fixed-effect model, we explore how the collectivist culture intensity affects pollution emissions in China. The empirical results indicate the significance of collectivism in enhancing emission reduction through environmental regulations. This conclusion remains robust even when excluding the impact of endogeneity concerns by adopting the instrumental variable approach. Heterogeneity analysis shows that collectivism is more effective in enhancing market-based environmental regulations rather than those driven by policies. Further mechanism analysis confirms that green innovation is a crucial pathway through which collectivism influences pollution emissions. These findings here will offer guidance to policymakers when formulating environmental policies for contexts with different regional cultures.

Does Market-Based Environmental Regulation Improve the Residents' Health: Quasi-Natural Experiment Based on DID.

Improving the residents' health is an important strategy for addressing the declining population dividend in China under the new development paradigm. Based on the panel data of 290 prefecture-level cities in China from 2010 to 2021, this paper uses environmental tax as a quasi-natural experiment, and adopts a DID model to explore the impact of market-based environmental regulation on the residents' health. The results show that the implementation of environmental tax can significantly reduce the population mortality rate, indicating an enhancement in residents' health outcomes. Mechanism analysis shows that environmental tax mainly relies on air quality to improve the residents' health. Also, the heath effect of environmental tax will be effective with the increase of income, and it's stronger in administrative border areas. Heterogeneity analysis shows that the effect of environmental tax on residents' health in western regions and resource-based cities is significantly stronger than those in central and eastern regions and non-resource-based cities. This paper provides new evidence for a comprehensive understanding of the impact of market-based environmental regulations on residents' well-being, offering insights for the implementation of green development strategies.