Management Practices and Climate Policy in China

51 Pages Posted: 4 Mar 2021 Last revised: 15 Mar 2021

See all articles by Soo Keong Yong

Soo Keong Yong

University of Waikato - Waikato Management School

Ulrich J. Wagner

University of Mannheim - Department of Economics

Peiyao Shen

ShanghaiTech University - School of Entrepreneurship and Management

Laure de Preux

Imperial College Business School

Mirabelle Muûls

Imperial College Business School and Grantham Institute - Climate Change and the environment; London School of Economics - Centre for Economic Performance

Ralf Martin

Imperial College London

Jing Cao

Tsinghua University

Date Written: February 28, 2021

Abstract

Cap-and-trade program for CO2 emissions are being considered by governments worldwide to address the climate change challenge. The success of such a market-based climate policy at minimizing overall abatement cost and fostering low-carbon investment and innovation depends on participants fully understanding the trade-offs between using, selling or banking a permit. We provide the first empirical evidence on how management quality moderates responses to carbon pricing, by analyzing on firms that participated in two of China's regional pilot emissions trading schemes (ETS), located in the city of Beijing and Hubei province. We collect new data by interviewing plant managers or lead engineers at 216 randomly selected firms, and combine them with financial, patent and energy consumption data for each firm. We show that well-managed firms have on average higher productivity, which has been documented in previous research. In addition, low-carbon innovation measures elicited from managers are strongly positively associated with "green" patenting.These results strengthen the credibility of our interview data. We also investigate whether carbon trading affects energy use of regulated firms. We estimate that the launch of the pilot ETS in Beijing has reduced consumption of coal and electricity by treated firms relative to control firms, but this effect is statistically significant only for well-managed firms. Our estimates imply that the overall reduction in coal use following the introduction of the pilot ETS would have been four times smaller if firms with above-median managers had been managed by below-median managers.

Keywords: climate policy; firm behavior; management practices; emissions trading scheme; policy evaluation

JEL Classification: D22, O31, Q48, Q54

Suggested Citation

Yong, Soo Keong and Wagner, Ulrich J. and Shen, Peiyao and de Preux, Laure and Muûls, Mirabelle and Martin, Ralf and Cao, Jing, Management Practices and Climate Policy in China (February 28, 2021). ShanghaiTech SEM Working Paper No. 2021-001, Available at SSRN: https://ssrn.com/abstract=3797466 or http://dx.doi.org/10.2139/ssrn.3797466

Soo Keong Yong (Contact Author)

University of Waikato - Waikato Management School ( email )

Te Raupapa
Private Bag 3105
Hamilton, 3240
New Zealand

HOME PAGE: http://https://www.management.ac.nz/about/contact-info/our-people/syong

Ulrich J. Wagner

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany

Peiyao Shen

ShanghaiTech University - School of Entrepreneurship and Management ( email )

100 Haike Rd
Pudong Xinqu, Shanghai
China

Laure De Preux

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Mirabelle Muûls

Imperial College Business School and Grantham Institute - Climate Change and the environment ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

London School of Economics - Centre for Economic Performance ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Ralf Martin

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Jing Cao

Tsinghua University ( email )

Beijing, 100084
China

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