China’s Carbon Emission Trading Scheme and Firm Performance

Abstract

We empirically investigate the effect of emissions trading scheme (ETS) on the corporate performance of Chinese listed firms from 2010 to 2016, treating China’s pilot ETS as a quasi-natural experiment. Our difference-in-differences analysis shows that the ETS is significantly correlated with corporate performance of high-energy-consuming firms. While the policy effect strengthens in the first few years and then weakens by 2016. This indicates that ETS cannot sustainably and steadily affect the corporate performance. Finally, we find that ETS has a stronger impact on the performance of high-energy-consuming firms in regions with high governmental intervention and an underdeveloped legal system.