Can China's Carbon Emissions Trading Rights Mechanism Transform its Manufacturing Industry? Based on the Perspective of Enterprise Behavior

Yue Dai, Nan Li, Rongrong Gu, Xiaodong Zhu
2018 Sustainability  
The pilot policy of carbon emissions trading rights covers six heavy pollution industries in the manufacturing industry and has achieved considerable emission reductions. Based on enterprise behavior, this study analyzes the impact of the carbon emissions trading rights pilot policy on the productivity of manufacturing enterprises. In addition, we examine whether the pilot policy can aid in the transformation and upgrading of China's manufacturing industry. Furthermore, we examine the influence
more » ... of carbon emissions trading rights on manufacturing enterprises of different sizes and with different property rights. The results show that the trading rights have not produced a "Porter effect" on the productivity of manufacturing enterprises in China or in subsamples based on the nature of enterprise ownership. The impact of the carbon trading rights on the productivity of state-owned manufacturing enterprises in the pilot provinces is based on the compliance cost hypothesis. Therefore, the pilot policy has yet to achieve coordinated economic, social, and environmental development. Lastly, we put forward several policy suggestions on the coordinated development of a carbon trading policy and manufacturing enterprises from the perspective of the government, enterprises, and society. The manufacturing industry is the foundation of China's national economy, but at the same time, consumes a significant amount of energy and has high levels of carbon emissions. The industry's low efficiency in terms of the use of resources and energy means environmental pollution is a serious problem. With the development of the "Made in China 2025" strategy, China's manufacturing industry requires innovation, intelligent manufacturing, a strong industrial base, and green development. The carbon emissions trading rights policy can help to develop the manufacturing industry in China, while reducing manufacturing carbon emissions, improving the efficiency of enterprise production, and transforming the use of energy within the manufacturing sector. Before implementing the carbon emissions trading rights policy fully, China conducted carbon trading pilot projects in eight major industries in Beijing, Tianjin, Shanghai, Chongqing, Hubei, Guangdong, and Shenzhen from 2013 to 2015, including the petroleum, chemical, building materials, iron and steel, non-ferrous metals, and paper industries. This provides us with an objective natural experiment to test carbon trading policies. In the domestic literature, only Fan Dan et al. [1] have analyzed the effect of a carbon emissions trading rights policy at the industry level using an empirical analysis and a difference-in-differences model. But in the global campaign to cope with climate change, "carbon emissions trading" is not a new word. The European Union Emission Trading Scheme (EU ETS) is the first multinational emissions trading system in the world [2] . It is also the world's largest total carbon emissions control and trading system. A lot of contributions have been made. Sun Rui et al. [3] obtain the best carbon price by constructing a social accounting matrix (SAM). Fu Jingyan et al. [4] use the zero-sum DEA model and consider regional demographic and economic differences. Oestreich et al. [5] based on the empirical research on the effect of European Union emissions trading system on German stock returns. It is concluded that the enterprises that get free carbon emission quotas have better returns than those without carbon emission quotas. Bebbington [6] studies the accounting impact of the carbon trading market. Based on a comparative analysis of a carbon tax and carbon trading rights, Murray et al. [7] conclude that carbon trading rights have the advantage of a relatively stable long-term price. While this work is motivated by past research, most of these previous studies discuss the feasibility and influence of the carbon emissions trading rights mechanism from a theoretical perspective at the macro level. Few studies examine the impact of the policy at the micro-enterprise level. In addition, the introduction of the pilot policy inevitably affects the behavior of manufacturing enterprises with high levels of carbon production, leading directly to the implementation of innovation activities and emission reduction measures. However, few studies have examined the impact of the carbon trading policy on the behavior of firms within the manufacturing industry. Therefore, we focus on Chinese manufacturing enterprises. Based on the dual-differential model, and from the perspective of corporate behavior, carbon emissions trading rights as an environmental policy can help to transform the Chinese manufacturing industry. The purpose of this paper is to test whether the pilot policy on carbon trading rights can adapt to and serve the development of manufacturing in the stage of its transformation and upgrading. Furthermore, we investigate the impact of carbon emission trading rights on manufacturing enterprises of different sizes and with different property rights. Lastly, based on the findings of the empirical analysis, we propose several policy suggestions to enrich the current literature and to improve the economic and social development of environmental policies. Theoretical Analysis and Research Hypothesis Theoretical Analysis According to the carbon trading rights policy, the government issues carbon quotas to companies, capping their carbon emissions [8, 9] . Then, companies can sell surplus quotas and purchase additional quotas when needed so that unregulated carbon rights are allocated artificially. As a means of environmental regulation, the policy aims to achieve an efficient allocation [10,11] through market trading, promote sustainable economic and social development, and fulfill the international
doi:10.3390/su10072421 fatcat:ajrm6ulnffaxfdsjxchmsfym4y