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<p>While Emissions Trading Schemes (ETS) have emerged as a cornerstone of global climate policy, their effectiveness in driving corporate green innovation remains contingent on firms’ internal governance structures. This study examines how monitoring versus incentive-based governance mechanisms shape ETS-induced innovation, using China’s pilot policy as a quasi-natural experiment. Through a multi-period difference-in-differences design applied to A-share listed firms (2008-2023), we demonstrate that ETS significantly promotes green innovation, with effects persisting multiple years post-implementation. Crucially, supervisory governance-manifested through ownership concentration and board independence-positively moderates this relationship, whereas executive incentive alignment shows no significant effect. Heterogeneity tests further reveal the innovation effect is concentrated in non-heavy-polluting sectors, non-state enterprises, eastern regions, and smaller firms. Our findings contribute to corporate governance literature by delineating how monitoring mechanisms, rather than incentive alignment, amplify regulatory effectiveness, while offering managers and policymakers insights into designing complementary governance structures for environmental regulation.</p>

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How do emissions trading schemes affect corporate green innovation: the moderating role of corporate governance

  • 期刊论文

  • 发表日期：

    2026年7月14日

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  • Xin Cheng,
  • Tingting Kang,
  • Shuqi You,
  • Qianqian Zhou,
  • Hira Naz,
  • Jingyue Gao,
  • Ziyi Yu,
  • Shiwei Jiang,
  • Yan Dai,
  • Xuan Liu,
  • Chao Wang,
  • Tingshuai Lu,
  • Tiancheng Huang

摘要

While Emissions Trading Schemes (ETS) have emerged as a cornerstone of global climate policy, their effectiveness in driving corporate green innovation remains contingent on firms’ internal governance structures. This study examines how monitoring versus incentive-based governance mechanisms shape ETS-induced innovation, using China’s pilot policy as a quasi-natural experiment. Through a multi-period difference-in-differences design applied to A-share listed firms (2008-2023), we demonstrate that ETS significantly promotes green innovation, with effects persisting multiple years post-implementation. Crucially, supervisory governance-manifested through ownership concentration and board independence-positively moderates this relationship, whereas executive incentive alignment shows no significant effect. Heterogeneity tests further reveal the innovation effect is concentrated in non-heavy-polluting sectors, non-state enterprises, eastern regions, and smaller firms. Our findings contribute to corporate governance literature by delineating how monitoring mechanisms, rather than incentive alignment, amplify regulatory effectiveness, while offering managers and policymakers insights into designing complementary governance structures for environmental regulation.