Carbon price and the misallocation of enterprise innovation resources

The carbon emissions trading mechanism increases production costs for regulated firms, which undoubtedly encourages enterprises to participate in technology research and development (R&D). However, it is unclear whether the carbon price will lead to misallocation of firms’ innovation resources. When R&D labour and capital are misallocated, increased R&D spending does not necessarily translate into innovation gains. Therefore, focusing on China’s carbon emissions trading mechanism, we systematically examine whether the carbon price affects firms’ innovation resource allocation and further evaluate social welfare after correcting for such misallocation. The analysis indicates that the carbon price exerts an inverted U-shaped effect on both R&D capital and labour misallocation; beyond a certain threshold, the carbon price helps reduce R&D resource misallocation. Further analysis indicates that correcting these misallocations significantly enhances both the quantity and quality of innovation output. These findings expand the research on carbon price mechanisms, highlight the importance of innovation resource allocation efficiency in climate governance, and provide evidence for designing carbon price policies that balance emission reduction targets with innovation efficiency.