How the dual pilot policy impacts corporate low-carbon transition: Evidence from energy use rights and carbon emission rights trading in China

Abstract

Energy use rights and carbon emission rights trading pilot policies are market-based measures designed to address climate challenges by encouraging firms to improve energy efficiency and reduce carbon emissions. In China, certain regions have implemented both policies simultaneously, giving rise to a dual pilot framework. However, the effect of this coordinated policy arrangement on corporate low-carbon transition (CLT) remains insufficiently examined. This study leverages panel data from China’s A-share listed companies between 2011 and 2021. We construct an optimized-EBM model that incorporates undesirable outputs to measure CLT performance and employ a synthetic difference-in-differences (SDID) approach to evaluate how the dual pilot policy impacts CLT. The empirical results demonstrate that the dual pilot policy significantly promotes CLT, with robustness checks supporting this finding. Mechanism analysis reveals two core channels: endogenous drivers—including green innovation, resource allocation, and operational capability; and exogenous responses—such as carbon risk awareness and green strategic orientation. Further heterogeneity tests suggest that the effect of dual pilot policy is more pronounced among private firms, those with higher financing constraints, in more market-oriented regions, and those not subject to green credit restrictions. Importantly, the dual pilot policy exhibits stronger effects than either policy implemented in isolation, enhancing enduring market performance while showing limited short-term impact. These findings offer factual supports for the effectiveness of integrated environmental governance and provide a valuable basis for future sustainable policy coordination.