Do environmental policy and innovation improve carbon productivity? Evidence from the Korean Emission Trading Scheme

This study investigates the relationship among technology innovation, emission trading schemes, and carbon productivity based on data from firms participating in the Korean Emission Trading Scheme. First, the total factor carbon productivity based on stochastic frontier analysis is estimated by industry and it is confirmed that changes in carbon productivity vary by industry. Based on the estimated carbon productivity, panel data analysis is conducted to determine the effects of innovation and environmental policy on carbon productivity. The results show that R&D investment and environmental policy play an important role in promoting carbon productivity. In this study, the factors affecting carbon productivity are also analyzed by industry. Comparative analysis across industries confirms that factors affecting environmental performance vary by industry. Innovation does not significantly affect carbon productivity in assembling industries, but in the process industry, R&D investment plays an important role in increasing environmental performance.

Can Emission Trading Scheme Improve Carbon Emission Performance? Evidence From China

This paper explores the effect of China’s emission trading scheme (ETS) pilot policy implemented during 2013-2014 on carbon emission performance. Adopting the Difference-in-Difference (DID) model, we find that: 1) China’s ETS pilot policy can significantly improve the carbon emission performance of listed companies in the pilot provinces. 2) The heterogeneity analysis shows that the carbon emission performance of listed companies in the eastern coastal pilot areas has improved significantly, which is not significant in the central and western pilot areas. 3) We find that China’s ETS pilot policy can significantly improve innovation capabilities of listed companies, suggesting that innovation is a channel for the impact of the China’s ETS pilot policy on carbon emission performance in the pilot provinces. Overall, our study shows that ETS pilot policy has played a governance role in China and improved carbon emission performance. We further highlight some important policy implications with respect to helping companies save energy and reduce emissions, and promoting the further improvement of China’s ETS pilot policy.

Determinants of firm-level energy productivity – Evidence from the Korean emission trading scheme

With increasing global pressure on transition to carbon neutrality, various technical and policy efforts such as emission trading scheme and carbon tax are being made to improve energy productivity. Yet, there are not many literatures that analyze determinants of firm-level energy productivity, which is an important issue as energy use in industry accounts for one fourth of global carbon emission. This study investigates factors affecting energy productivity such as technology innovation, environmental policy and energy price based on firm-level data from the Korean Emission Trading Scheme (KETS). The total factor energy productivity is estimated by industry based on stochastic frontier analysis (SFA) and panel data analysis is performed to identify determinants of firm-level energy productivity. The results show that energy productivity in Korea has been improved since 2016, and technical progress and environmental policy play an important role in promoting energy productivity. In addition, analysis identifying industry-specific characteristics is performed as their production process and energy consumptions structures vary. The result shows that innovation activity does not significantly affect energy productivity in process industries, but it does in the assembling and high technology industries. This paper implies that policy design reflecting industry-specific characteristics is important to improve energy efficiency more effectively.