Investigating the relationship between energy‐consuming rights trading and urban innovation quality

Abstract The Energy‐consuming rights trading policy (ECRTP) is an important environmental regulatory policy in China. The study's goal is to determine how trading in energy‐consuming rights and urban innovation status effects also promote ecological civilization and high‐quality development. The purpose of the study examines the relationship between ECRTP and urban innovation quality (UIQ). Using data from 271 Chinese cities between 2011 and 2020, a difference‐in‐difference (DID) model is used to theoretically and empirically analyze the effects of ECRTP on UIQ. The findings of the study are as follows: First, ECRTP showed a significant improvement in UIQ, although a lagged effect. This outcome offers fresh proof that the “Porter hypothesis” holds water in China. Second, mechanism analysis indicated that ECRTP could improve UIQ with industrial structure upgrading (ISU) and capital deepening. Third, analysis of spillover effects indicates that ECRTP has a key spillover impact on UIQ. Analysis of spillover effects indicates a positive influence of ECRTP on UIQ in surrounding cities. Fourth, heteroggeneity analysis further reveals the impact of ECRTP on UIQ is particularly pronounced in resource‐based and large‐scale cities. These findings are significant and also provide a valuable supplement to the existing study.