Does market-based environmental regulation enhance enterprises’ digital transformation? Evidence from carbon emission trading system

Digital transformation is a key path for enterprises to enhance their competitiveness. As a market-based environmental regulation instrument aimed at reducing carbon emissions and achieving the dual-carbon goals, the carbon emissions trading system (CETS) plays an important role in enterprises’ digital transformation (EDT). To fill the research gap on the role of CETS in EDT, this study utilizes panel data of Chinese listed firms from 2007 to 2022, treating CETS as a “quasi-natural experiment”, and employs a multi-period difference-in-difference (DID) model to explore the impact of CETS on EDT. The results indicate that, firstly, CETS significantly enhances EDT, and this finding remains robust across a series of tests, including the Goodman-Bacon decomposition and PSM-DID. Secondly, the promotional effect of CETS on EDT is associated with firm characteristics, region and industry. Its promotional role is more prominent in non-SOEs enterprises, small-scale enterprises, enterprises located in east areas, and enterprises operating in low-carbon and high-tech industry. Thirdly, CETS can facilitate EDT through R&D investment and resource allocation efficiency, and government participation positively moderates the positive impact of CETS on EDT. This study provides policy implications for promoting sustainable development and facilitating EDT.