How does carbon emissions trading scheme affect steel enterprises' pollution control performance? A quasi natural experiment from China

Abstract

Taking advantage of a 2005-2018 sample of 86 Chinese steel enterprises (CSEs) and the difference-in-differences method, this paper utilizes the carbon emissions trading scheme (ETS) - as a quasi-natural experiment to investigate the impact of the carbon ETS on the total factor pollution control efficiency (TFPCE) of CSEs to test the green development effect of the carbon ETS. Then, the green development effect of the carbon ETS is empirically tested by a variety of robustness tests, such as DDD and PSM-DID. The results show that the carbon ETS policy significantly improves the TFPCE of CSEs located in the pilot area, generating the green development effect, and that this the annual effect lags by one year. Additionally, the channel analysis from the perspective of enterprise internal management and the external environment shows that strategic innovation, substantive innovation and institutional quality play a positive role in enhancing pollution control performance respectively. The heterogeneity test shows that the green development effect is better for state-owned CSEs and CSEs located in the eastern and central China. The conclusion has significant implications for green and low-carbon development in heavy pollution industries and has implications for further promoting the implementation of market-oriented environmental regulations.

Keywords: Carbon emissions trading scheme (ETS); Chinese steel enterprises; Difference-in-differences method; Green development; Total factor pollution control efficiency.