Abstract Exploring the impact of the Carbon Emission Trading Pilot Policy (CETPP) on firm-level digital innovation, this study analyzes a dataset encompassing 25,371 Chinese A-share listed firms from 2007 to 2022 using a difference-in-differences approach. This study reveals that CETPP significantly enhances digital innovation capabilities within firms, with effects particularly strong in capital-intensive, technology-intensive, high-tech, manufacturing, and non-SOE. This research highlights two main mechanisms through which CETPP fosters digital innovation: first, by alleviating financing constraints, and second, by enhancing the visibility of firms within media outlets, which in turn attracts further investment and public support. These dynamics are shown to be robust across multiple tests addressing potential endogeneity concerns. The results not only underscore CETPP’s role in advancing environmental management but also illuminate its broader economic implications by facilitating a synergy between environmental sustainability and technological advancement. This study contributes novel insights into the policy’s effectiveness, offering a robust empirical foundation for policymakers and firms focusing on sustainable development strategies.
Chen et al. (Thu,) studied this question.