Management Practices and Climate Policy in China


ShanghaiTech SEM Working Paper No. 2021-001

 Soo Keong, Yong

University of Waikato

Ulrich J. Wagner

University of Mannheim

Peiyao Shen

School of Entrepreneurship and Management, ShanghaiTech University

Laure de Preux

Imperial College Business School

Mirabelle Muȗls

Imperial College Business School

Ralf Martin

Imperial College Business School

Jing Cao

Department of Economics, Tsinghua University

Cap-and-trade program for CO2 emissions are being considered by governments worldwide to address the climate change challenge. The success of such a marketbased climate policy at minimizing overall abatement cost and fostering low-carbon investment and innovation depends on participants fully understanding the trade-offs between using, selling or banking a permit. We provide the first empirical evidence on how management quality moderates responses to carbon pricing, by analyzing on firms that participated in two of China's regional pilot emissions trading schemes (ETS), located in the city of Beijing and Hubei province. We collect new data by interviewing plant managers or lead engineers at 216 randomly selected firms, and combine them with financial, patent and energy consumption data for each firm. We show that well-managed firms have on average higher productivity, , which has been documented in previous research. In addition, low-carbon innovation measures elicited from managers are strongly positively associated with "green" patenting.

Date Written: February 28,  2021

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