Carbon Emission Trading Pilot Policy and Corporate ESG Performance: Evidence from a Quasi-Natural Experiment in China

The institutional development of carbon trading mechanisms has prompted companies to place greater emphasis on ESG factors and incorporate them into strategic decision-making. This study considers the implementation of the carbon emissions trading pilot policy as a “quasi-natural experiment.” Based on the micro-data of China’s A-share listed companies from 2011 to 2020, this study comprehensively assesses the impact of the policy on corporate ESG performance and its underlying mechanisms using a multi-period difference-in-differences model. The empirical findings indicate that crucial regulated companies participating in the carbon emissions trading pilot policy programs significantly enhance their ESG performance. Further research suggests that the carbon emissions trading pilot policy bolsters corporate intrinsic motivation for ESG practices by fostering green technological innovation and increasing executive awareness of environmental issues. Heterogeneity analysis reveals that firms with large-scale operations and high R&D investments, as well as those located in new energy pilot cities, in regions where local officials are in key promotion periods, or in economically developed areas, experience more significant improvements in their ESG performance due to the carbon emission trading pilot policy.