Decarbonization pressure and business performance under the background of carbon neutrality – Evidence from industrial carbon lock-in

Carbon lock-in describes a state of high carbon path dependence, which hinders the low-carbon transition of industrial economies under a carbon-neutral vision. In the background of the government's efforts to achieve carbon neutrality, carbon overloading and its accompanying strategic decisions can affect the business production and operation in a market economy. Developing countries can fall into carbon lock-in when investing in industrialization, leading to decarbonization dilemmas. This paper measures the carbon lock-in level of industrial enterprises in China, and investigates the impact of carbon lock-in on the business performance of enterprises and its mechanism of action. The empirical results show that carbon lock-in has an inhibitory effect on the business performance of enterprises, and that enterprises adopting proactive decarbonization behaviors can provide a win-win potential choice for economic production and environmental green management. Further research has shown that in state-owned companies, high-leverage companies, and high-carbon industries, carbon lock-in significantly weakens business performance.