Every Second Counts: Do Environmental Policy Promote Innovation Speed?

The time urgency of China's reduction of carbon dioxide emissions and the green transformation of enterprises has entered a crucial stage. Chinese enterprises are counting every second to promote the green energy transformation. This study focuses on the green innovation efficiency and it contributes to the broad literature by adopting a novel method—duration analysis. The analysis is conducted by empirically testing the impact of China's carbon market construction on green innovation efficiency. This study looks at a time dimension perspective, and investigates whether the construction of the carbon market can accelerate the green transformation of enterprises and shorten the time for enterprises' green innovation. The paper studies China’s public traded firms from 2008 to 2022, and it uses the difference-in-differences analysis along with the propensity score matching and cox regressions. This paper finds that the construction of China’s pilot carbon market on 2011 promotes the innovation efficiency significantly, either a breakthrough from zero to the very first one green patent, or shortens the time between two green patents.