The impact of energy use rights trading policy on industrial companies' ' green investments - Evidence from a quasi-natural experiment in China

As the world's largest energy consumer, China's energy strategy is of great significance in achieving a low-carbon economy for the world. Among the various pathways towards a low-carbon economy, green investment represents a pivotal element. In contrast to traditional investment, which tends to undervalue externalities, green investment considers both economic and environmental effects. This multifunctional approach necessitates the implementation of effective environmental regulation to stimulate green investment. In 2015, China initiated a pilot energy use rights trading policy, offering a quasi-natural experiment in policy for corporate green investment. This paper examines the impact of China's energy use rights trading policy on increasing green investment by Chinese industrial companies. The aim is to provide a valuable reference for the promotion of increased green investment by industrial companies in China and other major economies. The paper empirically examines the micro-economies under the method of multi-period difference-in-differences, taking 4037 observations of 1166 A-share listed industrial companies in China as the research sample from 2013 to 2021, sourced from the Wind database and hand-collected financial statements. It is found that (1) the energy use rights trading policy can significantly promote Chinese industrial companies to increase green investment. (2) After controlling for companies' relevant financial data and undergoing a series of robustness tests, including the placebo test and the propensity score matching difference-in-difference (PSM-DID) test, our main findings remain significant and robust. (3) The heterogeneity results show that the energy use rights trading policy has a more significant role in promoting the increase of green investment in non-state-owned companies, companies in the central region, and companies in high energy-consuming industries.(4) In terms of mechanism analysis, we demonstrate that energy use rights trading policy can promote an increase in green investments by increasing the environmental responsibility index in companies' ESG ratings.