Carbon Emissions Trading Regulation and ESG Performance: Evidence from Carbon Emissions Trading Pilots in China
WEN Huiyu, DU Jiayue, GAO Haoyu, LI xinming
School of Management, Guangdong University of Technology; School of Management and Economics, The Chinese University of Hong Kong, Shenzhen; School of Finance, Renmin University of China; School of Finance, Nankai University
Summary:
Establishing a system for the paid use of natural resources and market-driven mechanisms for energy conservation and carbon reduction is a critical institutional safeguard for achieving the goals of carbon peaking and carbon neutrality. Cultivating the sustainable development capabilities of the economy is inseparable from the effective combination of a well-functioning market and a capable government. Carbon emissions trading scheme with government guidance serves as a core policy instrument for fostering the coordinated balance between the economic growth and sustainable development. The ESG initiatives require firms to address the externalities of their production activities while pursuing profit maximization. ESG performance is a comprehensive indicator of a firm's sustainable development capabilities. This paper examines whether and how the carbon emission trading schemes could motivate firms to actively participate in ESG engagement and cultivate sustainable development capabilities. Based on China's carbon emissions trading pilot programs gradually initiated since 2013, we adopt the propensity score matching (PSM) and the staggered difference-in-difference (DID) method to estimate the impact of implementing carbon emissions trading scheme on corporate ESG performance, using the data set of listed firms in China's carbon trading pilot regions from 2009 to 2020. We find that after the implementation of the carbon emissions trading scheme, regulated firms experienced a significant improvement of ESG scores relative to non-regulated firms, accounting for an approximately 15.96% standard deviation in ESG scores. This finding indicates that the market-based incentives provided by the carbon trading scheme significantly enhance the ESG engagement of regulated firms. Mechanism analyses indicate that carbon emissions trading scheme strengthens the economic value of low-carbon production, promotes corporate green innovation practices, and improves external information supervision of corporate environmental performance, thereby incentivizing firms to enhance their sustainable development capabilities actively. Heterogeneous analyses find that the role of carbon emissions trading scheme on corporate ESG performance is more pronounced in regions with higher carbon market effectiveness and stronger environmental regulation intensity of local governments, suggesting a synergy between an efficient market and a well-functioning government. Further analyses show that the carbon emissions trading scheme facilitates the synergy between reduction in carbon emissions and increases in low carbon development efficiency, and thus guides sustainable development. Our main results remain robust under alternative variable definitions, different propensity score matching methods, the inclusion of higher-order fixed effects, and placebo tests. This paper contributes to several strands of literature. First, our study highlights the interaction between corporate behavior and environmental policies from the novel perspective of ESG performance. We reveal the unique role of carbon emission trading scheme in mitigating the negative externalities of economic activities at lower costs, enhancing the understanding of how market-based environmental regulations contribute to effective environmental governance by coordinating economic performance and sustainable development. Second, in the context of the widespread application of ESG investment principles and the recognition of value relevance of ESG, we extend the literature of the driving factors of corporate ESG practices from the perspective of institutional design. We broaden the understanding of how to incentivize enterprises to pursue sustainable development. This study provides critical policy implications in guiding corporate sustainable development practices through market-based environmental mechanisms. First, to create a sustainability-oriented economic structure that balances economic growth with environmental protection, an efficient market and a proactive government intervention should work together to boost market dynamism and ensure the effective allocation of the carbon factor. Second, participants in capital markets should fully recognize the significant role of sustainable development in their investment evaluations and allocate capital towards industries and enterprises with high potential for emission reduction, leveraging the important functions of the capital market in serving the real economy and facilitating the transition toward sustainable economic development. Third, firms should strengthen carbon risk management and seize opportunities for green transformation. By enhancing environmental performance, firms could drive comprehensive improvements in social and governance performance, strive for the synergistic development of financial performance and ESG outcomes while building long-term sustainability.
[1]陈诗一和陈登科,2018,《雾霾污染、政府治理与经济高质量发展》,《经济研究》第2期,第20～34页。 [2]方先明和胡丁,2023,《企业ESG表现与创新——来自A股上市公司的证据》,《经济研究》第2期,第91～130页。 [3]高昊宇和温慧愉,2021,《生态法治对债券融资成本的影响——基于我国环保法庭设立的准自然实验》,《金融研究》第12期,第133～151页。 [4]胡珺、方祺和龙文滨,2023,《碳排放规制、企业减排激励与全要素生产率——基于中国碳排放权交易机制的自然实验》,《经济研究》第4期,第77～94页。 [5]胡珺、黄楠和沈洪涛,2020,《市场激励型环境规制可以推动企业技术创新吗？——基于中国碳排放权交易机制的自然实验》,《金融研究》第1期,第171～189页。 [6]解学梅和朱琪玮,2021,《企业绿色创新实践如何破解“和谐共生”难题？》,《管理世界》第1期,第128～149页。 [7]牛建波、吴超和李胜楠,2013,《机构投资者类型、股权特征和自愿性信息披露》,《管理评论》第3期,第48～59页。 [8]钱雪松、唐英伦和方胜,2019,《担保物权制度改革降低了企业债务融资成本吗？——来自中国〈物权法〉自然实验的经验证据》,《金融研究》第7期,第115～134页。 [9]王垒、曲晶和刘新民,2019,《异质机构投资者投资组合、环境信息披露与企业价值》,《管理科学》第4期,第31～47页。 [10]王馨和王营,2021,《绿色信贷政策增进绿色创新研究》,《管理世界》第6期,第173～188页。 [11]吴茵茵、齐杰、鲜琴和陈建东,2021,《中国碳市场的碳减排效应研究——基于市场机制与行政干预的协同作用视角》,《中国工业经济》第8期,第114～132页。 [12]闫海洲和陈百助,2017,《气候变化、环境规制与公司碳排放信息披露的价值》,《金融研究》第6期,第142～158页。 [13]张成、陆旸、郭路和于同申,2011,《环境规制强度和生产技术进步》,《经济研究》第2期,第113～124页。 [14]张希良、张达和余润心,2021,《中国特色全国碳市场设计理论与实践》,《管理世界》第8期,第80～95页。 [15]赵思琦、刘庆富、杨金强和李源,2023,《全国碳市场的碳排放权配额管理机制设计——基于碳交易和风险对冲的视角》,《金融研究》第12期,第74～93页。 [16]周畅、崔也光和赵星竹,2024,《碳交易的企业声誉影响》,《会计研究》第3期,第124～137页。 [17]Acemoglu, D., P. Aghion, L. Bursztyn and D. Hemous, 2012, “The Environment and Directed Technical Change”, American Economic Review, 102(1), pp. 131～166. [18]Agliardi, E., T. Alexopoulos and K. Karvelas, 2023, “The Environmental Pillar of ESG and Financial Performance: A Portfolio Analysis”, Energy Economics, 120,p. 106598. [19]Bai, J. and H. Ru, 2024, “Carbon Emissions Trading and Environmental Protection: International Evidence”, Management Science, 70(7), pp. 4593～4603. [20]Bartram, S. M., K. Hou and S. Kim, 2022, “Real Effects of Climate Policy: Financial Constraints and Spillovers”, Journal of Financial Economics, 143(2), pp. 668～696. [21]Chen, F., Z. Chen and X. Zhang, 2024, “Belated Stock Returns for Green Innovation under Carbon Emissions Trading Market”, Journal of Corporate Finance, 85, p.102558. [22]Cronqvist, H. and F. Yu, 2017, “Shaped by Their Daughters: Executives, Female Socialization, and Corporate Social Responsibility”, Journal of Financial Economics, 126(3), pp. 543～562. [23]De Angelis, T., P. Tankov and O. D. Zerbib, 2023, “Climate Impact Investing”, Management Science, 69(12), pp. 7669～7692. [24]Hartzmark, S. M. and A. B. Sussman, 2019, “Do Investors Value Sustainability？ A Natural Experiment Examining Ranking and Fund Flows”, The Journal of Finance, 74(6), pp. 2789～2837. [25]He, Y., X. Zhao and H. Zheng, 2023, “How Does the Environmental Protection Tax Law Affect Firm ESG？ Evidence from the Chinese Stock Markets”, Energy Economics, 127, p. 107067. [26]Ivanov, I. T., M. S Kruttli. and S. W. Watugala, 2024, “Banking on Carbon: Corporate Lending and Cap-and-Trade Policy”, The Review of Financial Studies, 37(5), pp.1640～1684. [27]Liang, H. and L. Renneboog, 2017, “On the Foundations of Corporate Social Responsibility”, The Journal of Finance, 72(2), pp. 853～910. [28]Oh, D. H., 2010, “A Global Malmquist-Luenberger Productivity Index”,Journal of Productivity Analysis,34, pp. 183~197. [29]Pedersen, L. H., S. Fitzgibbons and L. Pomorski, 2021, “Responsible Investing: The ESG-Efficient Frontier”, Journal of Financial Economics, 142(2), pp. 572～597.
