Have carbon emission trading pilot policy improved urban innovation capacity? Evidence from a quasi-natural experiment in China

The carbon emission trading pilot policy is an important initiative to achieve synergistic economic-environmental development. Based on the data of 268 cities in China from 2006 to 2020, this paper analyzes the impact of carbon emission trading pilot policy on urban innovation capacity by using a time-varying difference-in-difference model. The study shows that, first, the implementation of the CETP improves the innovation capacity of cities, and the robustness test confirms the above findings. Second, the effect of the policy on enhancing urban innovation capacity is heterogeneous between the type of innovation and city type: the promotion of innovation capacity is stronger for utility model patents and non-capital cities. Third, there is a positive spillover effect of the implementation of the CETP on the promotion effect of the urban innovation capacity, which can lead to the improvement of the innovation capacity of neighboring cities. This paper has some reference value for building a unified carbon emission trading market and promoting low-carbon economic development within China.