The Role of Carbon Trading in Enhancing Enterprise Green Productivity and ESG Performance: A Quasi‐Natural Evidence From China

ABSTRACT The carbon emission trading system (CETS) efficiency in increasing enterprise green productivity is attracting significant interest. This study proposes implementing a carbon‐emissions pricing system in China, viewing it as a quasi‐natural experiment. It investigates the aforementioned prone from a corporate green total factor productivity (GTFP) perspective. This article uses a sample of A‐share listed businesses from 2005 to 2021 from the Shenzhen and Shanghai exchanges. The research confirms that the CETS enhances the GTFP. Furthermore, the CETS has a threshold effect on enterprise green total factor productivity determined by carbon market efficiency. It also reveals that green innovation and resource allocation efficiency mediate the CETS‐GTFP link. Further analysis shows that the CETS promotes GTFP more when firms are more diversified, state‐owned, and have lower Environmental, Social and Governance (ESG) ratings. This article highlights the microeconomic implications of the carbon emission pricing system, which can help construct a national carbon market and enhance green development initiatives.