How can carbon trading promote the green innovation efficiency of manufacturing enterprises?

Effectively improving the green innovation efficiency (GIE) in manufacturing is an important way to break through environmental and energy constraints. This study explored multiple mechanisms of carbon trading in GIE using a sample of A-share listed manufacturing enterprises in China from 2015 to 2020. The findings indicated that (1) carbon trading has a significant promoting effect on the GIE of manufacturing enterprises; (2) carbon trading promotes GIE by increasing government subsidies, research and development investment, and financing constraints; and (3) carbon trading has a single threshold effect on promoting GIE. When the carbon trading price (CTP) is at or below the threshold value, a 1% increase in CTP results in a 0.0785% increase in GIE; when the CTP exceeds the threshold value, the promotion effect weakens to 0.0498%. The threshold value varies according to the heterogeneity of property rights and technical intensity. The government should guide CTPs to the optimal range, provide reward-punishment mechanisms, and formulate stringent but distinct green innovation policies according to the specific characteristics of manufacturing enterprises. This study enriches the cutting-edge literature on environmental and energy economics and expands the research boundaries of carbon trading and enterprise GIE, which also helps improve the carbon trading market and provides micro-level theoretical guidance to deepen environmental policy in practice.