Market-based environmental regulations and green innovation: Evidence from the pilot carbon markets in China

Abstract

Using a data set of the first seven Chinese pilot carbon markets, we demonstrate that participation in the carbon market can encourage firms to engage in green innovation, with big and non-polluting firms particularly motivated. From an external monitoring perspective, we find that investor and media attention are important factors in promoting green innovation through environmental regulations. Furthermore, we verify the positive effect of China's carbon market policy on the quality of corporate innovation by integrating data from the subsequent pilot carbon markets and the national carbon market. Our research highlights the market attributes of environmental regulations and provides new perspectives.