Will Higher Carbon Trading Prices Boost Corporate Green Innovation?

China is facing more and more problems such as climate warming and energy depletion while the world economy is growing at a fast pace.Limiting carbon emissions and carbon trading have become important factors that restrict the environment for companies to develop,and carbon trading is an important means to reduce CO₂ emissions in China.Current research at home and abroad is mainly based on macro-level and micro-level studies on the impact of carbon trading and the influencing factors of green innovation.At the macro level,research has found that the adverse social and economic impacts of environmental pollution can be effectively reduced through policies related to limiting carbon emissions.Changes in carbon emissions intensity have a significant impact on the share of the tertiary sector,and therefore,a reduction in carbon emissions intensity can drive an improvement in industrial structure.At the micro level,it is found that under the dual technology model,the price of carbon trading affects the market profit of firms and thus the optimal production volume of firms.In terms of corporate green innovation,institutions and policies are the most important factors influencing green innovation.From a macro perspective,firstly,government environmental regulation can facilitate green innovation.Secondly,research has shown that there are significant differences in the role of different environmental regulation instruments on green innovation in terms of the particular type of environmental regulation.The micro factors affecting corporate green innovation are five factors examined:corporate environmental management factors,corporate governance factors,corporate resources,capacity and strategy factors,corporate knowledge factors,and stakeholder pressure factors.Based on neoclassical economic theory,Porter’s hypothesis and the theory of corporate environmental scanning,this thesis proposes the hypothesis that,all else being equal,the higher the price of carbon trading,the more green innovation a firm will have,and wonders how the price of carbon trading affects corporate green innovation and whether the impact of the price of carbon trading on corporate green innovation will be different for firms of different nature and size.In order to test the above hypothesis and to explain the related issues,this thesis selects a sample of A-share listed companies in the heavy pollution industry from 2013 to 2020 and verifies through multiple linear regressions,all significant at the 1%level,that an increase in the price of carbon trading will promote enterprises to engage in green innovation related activities.This thesis designs a series of tests for the above study,including the following five aspects.Firstly,the robustness of the regression results is verified by replacing the model,replacing the dependent variable and the independent variables,all of which remain significantly positive.Secondly,the estimated coefficient of the carbon trading price is significantly positive when the lagged period of the explanatory variable is selected as the instrumental variable for the endogeneity test,which is consistent with the regression results underlying this thesis.Third,by testing the mechanism,based on the stakeholder concern perspective,it is shown that carbon trading price will increase stakeholder concern,and the increase of stakeholder concern will promote corporate green innovation;based on the corporate cost pressure perspective,the study concludes that carbon trading price will increase corporate cost pressure,and the increase of cost pressure will promote corporate green innovation.Fourthly,by studying the regulation effect,it is found that the coefficient of the cross-product of executive compensation incentive and carbon trading price is significantly positive,indicating that executive compensation incentive plays a positive regulation role;the coefficient of the cross-product of environmental regulation and carbon trading price is significantly positive,indicating that environmental regulation plays a positive regulation role;the coefficient of the cross-product of government subsidy and carbon trading price is significantly positive,indicating that government subsidy plays a positive regulation role.The coefficient of the cross product of government subsidies and carbon trading price is significantly positive,indicating that government subsidies play a positive regulatory role.Fifthly,the heterogeneity test reveals that the increase in the price of carbon trading is more effective in promoting green innovation among large enterprises and non-state enterprises.The main contributions of this thesis are as follows:Firstly,the impact of carbon trading on corporate green innovation has been less studied in previous literature at home and abroad,but this thesis fills the gap in this part of the research by exploring the factors that influence green innovation.Secondly,this thesis establishes theoretically the influence mechanism on green innovation and conducts an empirical study on green innovation in China from an empirical perspective,expanding the current research system on green innovation in the field and providing a new empirical basis for its influence factors;thirdly,by studying the influence mechanism of carbon trading price on corporate green innovation,it reveals its influence on stakeholders and corporate costs,which helps to better Third,it helps us to gain a deeper understanding of the relationship between China’s carbon trading policy and the behaviour of micro firms,and also high financing constraint’s research on this topic.