Quasi-experimental study demonstrates carbon emission trading shifts innovation toward core climate mitigation technologies in industrial firms, indicating policy-driven directed technological change.
This paper investigates how China’s Carbon Emission Trading Market (CETM) reshapes the direction of corporate green innovation towards core climate mitigation technologies (CCMTs). Treating the CETM as a quasi-natural experiment, we apply a triple-difference (DDD) design to industrial firms, examining both the volume of CCMT innovation and its share of the firm’s green-technology portfolio. The CETM raises both, supporting the directed-technological-change view of innovation reallocation. The effect operates through carbon price level, trading activity, and market stability, and improves firms’ carbon performance by lowering emissions at a given output. It is stronger in low-climate-risk firms and low-pollution industries, concentrated in energy-saving-and-recovery and CCUS technologies, and diluted where governments are highly climate-responsive. Punitive interventions suppress the directed effect, whereas subsidies sustain innovation volume but dilute its structural shift. Our findings extend directed technological change from the rate to the direction of innovation and inform synergistic climate policy design.
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Tang et al. (2026) studied this question.
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