How do the designs of emission trading system affect the value of covered firms-A quasi-natural experiment based on China

Under the effective cost constraint, the emission trading system (ETS) can put pressure on the covered firms to cut emissions through reasonable system designs. Under the ETS with different system designs, firms face different cost constraints. Therefore, how ETS designs affect the value of covered firms is important to evaluate the effectiveness of ETS. Based on the Chinese A-share listed firms from 2010 to 2019, this paper employs DID, Mediation-DID, and Moderated Mediation Methods to investigate the influence of system designs of seven pilot ETSs on the value of covered firms. The main findings are as follows. First, in general, the value of covered firms is improved by the implementation of pilot ETSs. Compared with free allowances, paid allowances have a stronger promotion effect on firm value, in which the technology innovation plays a positive mediation role. Second, from the perspective of free allowances, the benchmarking method can promote firm value more effectively than the historical method, through the paths of technology innovation and carbon information disclosure (CID). Third, the increase of carbon price level and its stability can promote firm value. Specifically, the carbon price level only promotes firm value through CID, while the carbon price stability promotes firm value through technology innovation and weakens firm value through CID. Moreover, for firms owned by the State or in high-carbon industries, the value improvement effect of ETS is more significant.