The effect of carbon emission trading on enterprises’ sustainable development performance: A quasi-natural experiment based on carbon emission trading pilot in China

The establishment of carbon emission trading (CET) market is an important tool to achieve the “double carbon goal” in China. As an environmental regulatory tool based on market incentives, it remains to be tested whether participating enterprises can achieve sustainable development. This study selects the data of listed enterprises from 2010 to 2020, using the carbon trading pilot policy as a quasi-natural experiment, and employing the time-varying difference in difference (DID) and the improved propensity score matching (PSM)-time varying DID to jointly identify the impact and mechanism of CET pilot policy on the sustainable development performance of enterprises. The results showed that, first, participation in CET market is conducive to improving the sustainable development performance of enterprises, and the empirical results pass the robustness tests. Second, “investors' attention” and “government regulations” play a mediating and moderating role, respectively. Third, the effect of CET on economic, environmental and social aspects of enterprises’ sustainable development performance showed significant heterogeneous results with the difference of the pilot region, the nature of equity, and the size of the enterprise. This study verifies the effectiveness of the pilot CET policy and provides policy recommendations for establishing a national CET market.