Carbon Emission Trading Schemes Induces Technology Transfer: Evidence from China

Carbon emissions trading schemes (ETS) are critical environmental regulation policies that can reduce regional CO2 emissions and promote innovation. China's carbon ETS, applied at the city level, has yet to be studied for its effects on technology transfer. We investigate how carbon ETS affects technology transfer in China's prefecture-level cities using the difference in differences (DID) method. The results show that compared to the control group, technology transfer strength in the treatment group increased by 0.185 units on average. There are two directions in which technology transfer strength can be significantly increased: in-strength and out-strength. In addition, we find that carbon ETS can greatly promote technology transfer cross provinces. Furthermore, we explored the heterogeneous effects of city scale and innovation environment on technology transfer. The carbon ETS also promotes more significant effects on technology transfer in big cities. A city with a low innovation environment is not conducive to promoting technology transfer in comparison with a city with a good innovation environment.