Do carbon emission trading schemes stimulate green innovation in enterprises? Evidence from China

For climate change mitigation, China launched seven pilot areas before establishing a unified carbon emission trading system in 2014. This study explores the “weak” version of the Porter hypothesis while focusing on listed companies in 31 provinces (municipalities or autonomous regions) from 1990 to 2018. In this study, we provided preliminary evidence on the influence of China's carbon emission trading scheme pilot policy on green innovation based on green patent data. Results show that the “weak” Porter hypothesis has not been realized in the current carbon trading market of China. Moreover, the pilot policy has significantly decreased the proportion of green patents by approximately 9.26%. Then, we find that the pilot policy has an evident lagging effect on restraining the green innovation of enterprises. Furthermore, inhibition is more pronounced among the samples of small-scale, manufacturing, and non-state-owned companies, including companies in the eastern and central regions. Most importantly, companies mainly choose to reduce output rather than increase green technological innovation to achieve their emission reduction targets. Moreover, companies reduce their investment in research and development because of the reduction in cash flow and expected income, which is not conducive to green innovation.