The impact of carbon emissions trading on the directed technical change in China

This paper focuses on whether carbon emissions trading (CET) has different impacts on the heterogeneous low-carbon innovation, and how CET affects the direction of technical change. Taking six CET pilot regions in China as research objectives, we set two types of technology as the clean and the gray with CPC-Y02 patent codes, and use the synthetic control method (SCM) in quasi-natural experiment. Moreover, this paper analyzes how CET moderates the effects of other three factors, that is, control-and-command environment regulation, foreign capital inflow and industry structure, with different innovations. The results show that the effects of CET on the direction of technical change are different across regions. CET successfully induces technical change to the clean direction and restrains the gray direction in Beijing and Shanghai, while promoting both innovations in Tianjin and Hubei, only intensifying the gray in Guangdong and Chongqing. These results indicate CET has a significant impact on both innovations, but its impact on the direction of technical change seems to be neutral, depending more on the balance between the new regulation and existing dependence on technological path in each region. Further research finds that CET amplifies the positive effect of industry structure upgrading on both kinds of innovations, but the response of the clean is more sensitive than that of the gray. Moreover, foreign capital inflow can promote the clean in the current period and inhibit the gray with lags, and the significant interaction between CET and foreign capital inflow can not be found. However, the policy mixed CET with control-and-command regulation leads to more gray innovation. The further analyses imply that CET can be a useful instrument leading to the right direction of technical change under certain backgrounds, where industry structure is upgrading, more open for foreign investment with less control-and-command regulations.