The Impact of a Carbon Emissions Trading System on Technological Innovation for Renewable Energy Companies in China

This study empirically examines the impact of China’s Emissions Trading Scheme (ETS) on technological innovation in the renewable energy sector. Using panel data for 82 listed renewable energy firms from 2010 to 2021, we construct a composite innovation index via principal component analysis. Difference-in-Differences (DiD) estimates show that the ETS significantly promotes aggregate innovation performance (coefficient = 0.139, p < 0.01) and patenting activity, with the strongest effect observed among state-owned enterprises (interaction term = 1,439.557, p < 0.01). Further, Firm size is positively associated with innovation, while profitability and ownership concentration have limited or negative effects. These findings suggest that the ETS not only mitigates emissions but also fosters green technological innovation. Policy implications highlight the need to enhance market stability and align allowance allocation and support measures with firm ownership to maximize innovation outcomes.