Assessing the impact of emissions trading scheme on low-carbon technological innovation: Evidence from China

A global consensus on carbon emission reductions has been reached for combating climate change. The Chinese government has clearly stated that it is necessary to make full use of market means to improve the level of environmental governance. Emissions trading scheme (ETS) is a typical market means to accelerate low-carbon economic transition. Low-carbon technological innovation is one of the key factors affecting carbon emissions. However, literature on the relationship between ETS and low-carbon technological innovation is relatively scarce at present. This study assesses the effect of pilot ETSs on low-carbon technological innovation, and a difference in differences (DID) model is adopted to analyze China's provincial panel data from 2003 to 2017. The results indicate that China's pilot ETSs can significantly promote low-carbon technological innovation, and changing the window period, PSM-DID and placebo test all verify the robustness of this finding. The dynamic effect test reveals that China's pilot ETSs will gradually increase the effect on low-carbon technological innovation over time. The heterogeneity analysis shows that the effect of China's pilot ETSs on low-carbon technological innovation is more obvious in Guangdong, Hubei, Tianjin and Chongqing. The mechanism analysis suggests that marketization degree and green consumption concept can positively moderate the impact of China's pilot ETSs on low-carbon technological innovation, and industrial structure upgrading plays a positive mediating role between China's pilot ETSs and low-carbon technological innovation. This study is conducive to assessing the policy effectiveness of China's pilot ETSs and provides an empirical evidence for promoting the development of the carbon emissions trading market.