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Sustainability 2017, 9(6), 872;

Does Environmental Policy Reduce Enterprise Innovation?—Evidence from China

Australia Business School, University of New South Wales, Sydney 2052, Australia
School of Economics and Management, Northwest University, Xi’an 710127, China
Author to whom correspondence should be addressed.
Academic Editor: Gurkan Kumbaroglu
Received: 9 March 2017 / Revised: 17 May 2017 / Accepted: 18 May 2017 / Published: 23 May 2017
(This article belongs to the Section Economic, Business and Management Aspects of Sustainability)
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With the serious worldwide problem of carbon emissions, carbon emissions’ control and trade have become necessary policies adopted by the governments, after the establishment of the EU Emissions Trading System (EU ETS), China has also implemented a similar carbon emission trading pilot policy which plays a vital role in environmental regulation and influences enterprise behaviors, so this paper will put more focus on the impact of this policy on the enterprise innovation. In this paper, we construct a theoretical model and use the “Chinese Carbon Emissions Trading Pilot Policy” as a quasi-natural experiment to accurately identify the net causal effect of this environmental policy on enterprise innovation. Moreover, we use the synthetic control and difference-in-differences methods to eliminate the endogeneity to a large extent and conduct the robustness tests, difference-in-differences method, placebo test, and permutation test to respectively confirm these results. The results show that the implementation of carbon emissions trading policy will significantly reduce the enterprise innovation in general, this conclusion is contrary to the EU ETS’s effect, which is confirmed by plenty of previous empirical study. However, this policy has different effects across enterprises of different industries and different types of innovation. It can promote enterprise innovation of environmental industry, but it will inhibit enterprise innovation of non-environmental industry; besides, it can promote the development of green technical innovation and inhibit non-green technical innovation, which is basically identical to the causal effect of EU ETS. View Full-Text
Keywords: carbon emissions trading pilot; synthetic control method; enterprise innovations carbon emissions trading pilot; synthetic control method; enterprise innovations

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Feng, C.; Shi, B.; Kang, R. Does Environmental Policy Reduce Enterprise Innovation?—Evidence from China. Sustainability 2017, 9, 872.

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