Does carbon trading mechanism improve the efficiency of green innovation? : evidence from China

Although the innovation effects of carbon trading mechanism (CTM) have attracted considerable concern, there is still a lack of empirical research on how the CTM promotes the efficiency of green innovation in China. Therefore, this paper purposes to investigate how CTM affects the efficiency of green innovation and revels its potential paths, including industrial structure, energy structure, technological innovation, human capital, and foreign direct investment (FDI), based on panel data of 30 provinces and cities in China spanning from 2008 to 2020. SBM-DEA model is employed to calculate the efficiency of green innovation in 30 provinces and cities. We then employ the synthetic control method (SCM) to investigate the influence of the CTM on the efficiency of green innovation, and the results show that the CTM can improve the efficiency of green innovation. By using the Hausman model, several conclusions are obtained. First, the CTM has a positive effect on improving the efficiency of green innovation. Second, from 2008 to 2020, the efficiency of green innovation in China is continuously improving, although it is still imbalanced across regions. Third, the CTM can influence the efficiency of green innovation by affecting the industrial structure, energy structure, human capital, and FDI.