How does carbon emissions trading scheme affect the investment efficiency of companies? Evidence from China

Carbon emissions trading scheme (ETS) will change the internal and external operating environment of related companies, increase new carbon reduction costs, and may affect their investment behavior and decision-making. This study constructs the policy effect evaluation model to evaluate the net effect of China's ETS pilot policy on the investment efficiency of related companies in high-carbon industries. This study indicates that: first, China's ETS pilot policy has reduced the inefficient investment of related companies by 11.40% during the sample period. Second, innovation ability plays an enhanced moderating effect in the inhibitory effect of China's ETS pilot policy on the inefficient investment of related companies in the short term, but the effect is weakened in the long-term. Third, the policy effect is relatively obvious for non-state-owned companies and companies with more institutional shareholdings. This research has important reference value for the continuous improvement of China's national carbon market, and the steady transformation from simple investment-driven to investment-efficiency-driven economic development in China.