Unveiling the Impact of China’s Carbon Trading Pilot Policy on Corporate Green Innovation: A Time-Varying Difference-in-Differences Analysis

This study examines the impact of China's carbon trading pilot policy on corporate green innovation. We use a time-varying difference-in-differences approach to consider the possible staggered initiation of carbon trading pilots. We find that carbon trading pilot policy enhances corporate green innovation capabilities through industrial upgrading, expanded innovation investment, and increased foreign direct investment. In addition, state-owned enterprises exhibit a more significant enhancement in green innovation capabilities owing to their unique characteristics and preferential policy advantages. Overall, the industrial, technological, and foreign investment mechanisms constitute the bridges through which carbon trading pilot policy yield the Porter effect.