Seminar Vol. 186
Title: China's ETS Improves Firms' Competitiveness
Speaker: Jingbo Cui, Duke Kunshan University
Time: October 18th, 2019 10:30-12:00
Venue: Conference Room 106B, IESR, Zhonghui Building (College of Economics)
About the speaker:
Jingbo Cui is Associate Professor of Applied Economics at Division of Social Sciences in Duke Kunshan University. Prior to the current position, he was a Chu-Tian Junior Scholar from Department of Education in Hubei Province, Associate Professor in the School of Economics and Management at Wuhan University, Post-doctoral Research Associate and Visiting Scholar at Iowa State University. He holds a Ph.D. in economics from Iowa State University. Dr. Cui’s research centers on Environmental Economics, Economics of Innovation, and International Trade. His research has appeared in top academic journals in the fields of Environmental and Resource Economics, Agricultural Economics, and Energy Economics. He has been serving as the referee for leading journals in Environmental Economics, such as JEEM, JAERE, ERE, and many others. His current research projects on climate change and low-carbon innovation have been funded by the National Natural Science Foundation of China. Recent research projects include economic analysis of climate change, welfare impacts of biofuel policies, and effects of environmental policies on environmental innovation.
Abstract:
Under the Paris Agreement, China has pledged to tackle climate change by resorting to a market-based instrument - regional emission trading scheme (ETS) pilots - to limit its carbon emissions. At the crossroad of stepping towards national ETS from regional pilots, it is pivotal to assess the economic impacts of regional ETS pilots on firm competitiveness. With this objective, we assemble a unique firm-level dataset during the 2003-2016 period. Controlling for a series of firm attributes, regional and industrial factors affecting firms’ competitiveness, we employ the state-of-the art regression model, featured by a difference-in-difference-in-differences (DDD) approach, to evaluate the effects of ETS on firm competitiveness measured by low-carbon innovation and market values. We find that the ETS pilots contribute to firms’ innovation transition towards low-carbon technologies. This policy-induced innovation effect is more pronounced in encouraging low-carbon technological changes into radical innovation relative to incremental innovation. Accounting for subsidiaries’ exposure to regional ETS pilots does not alter the main findings. The larger the shareholding ratios owned by parent companies, the stronger the policy-induced innovation effect would be. Moreover, ETS leads to gains in firm value, in particular to those firms with the relevant knowledge stock prior to the ETS period. Some heterogeneity across regional pilots are detected. The more active pilots—measured by carbon price and turnover rate of allowance trading—tend to have more intense low-carbon innovation and higher returns of market values both at the firm-level.
