Does the carbon emissions trading scheme promote green technology innovation? New evidence from Chinese cities

Determining whether the launch of the carbon emissions trading scheme (ETS) in China in 2013 has advanced green technology innovation is crucial for future policymaking. In this study, we use the difference-in-difference approach to explore the impact of the ETS on green technology innovation by utilizing the panel data of green patents from 253 cities during the 2007–2021 period. The results show that the ETS significantly promotes urban green technology innovation, and robustness tests support this finding. Our conclusions align with studies on the effect of ETS on green technology innovation in the industrial sector in the European Union. However, further regression results varied based on factors associated with city size and type. The ETS played a significant role in promoting green technology innovation in small and medium-sized cities but had no significant effect on large cities and megacities. Furthermore, the ETS promoted green technology innovation in cities with low political status, but had a non-significant effect on cities with high political status. The study’s findings augment existing research on ETS and green technology innovation and serve as a guide for policymakers in developing relevant regulations.