Decomposition of Driving Factors of Green Innovation in Carbon Emissions Trading Pilot Enterprises
DOI:
https://doi.org/10.54097/mtmbzh95Keywords:
Green innovation, Carbon emissions trading policy, Logarithmic mean Divisia indexAbstract
This paper investigates the factors driving green innovation in Chinese listed firms from 2012—when China launched its pilot carbon trading policy—through 2022. Building on the logarithmic mean Divisia index (LMDI) decomposition method, we disaggregate changes in green patent applications into four firm-level effects: economic scale, R&D investment intensity, R&D efficiency and green patent share. Our panel dataset combines green and total patent counts from CNRDS with R&D and revenue data from CSMAR, excluding financial and “ST” firms. Time-series decomposition reveals that both pilot and non-pilot firms achieved substantial growth in green patenting, with non-pilot firms slightly outperforming pilots and both groups experiencing a pandemic-related slowdown in 2022. The green share effect proved the most powerful driver, reflecting a widespread strategic reallocation of R&D toward environmental technologies. Pilot firms saw early gains in R&D efficiency under carbon trading, which reversed after 2018 as they shifted toward fewer, higher-value patents. R&D intensity rose most sharply among pilot firms post-2018, indicating that sustained carbon pricing strengthened innovation budgets. Economic scale consistently supported patent growth across all firms. We conclude that market-based carbon regulation can catalyze initial efficiency and investment responses, but lasting green innovation requires a structural shift in corporate R&D priorities. Policy recommendations include expanding carbon market coverage, enhancing targeted R&D incentives, fostering collaborative innovation ecosystems, and integrating environmental regulation with green finance and intellectual property protection.
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