Under the guidance of the dual-carbon target, the development of the carbon financial system is of great significance to compensate for the gap between green and low-carbon investment. Considering the current state of the development of carbon financial system, China has initially formed a carbon financial system, including participants, carbon financial products and macro and micro operation structures, but the system is still in the initial development stage. Given the current restrictions on the development of carbon finance, it can be seen that there are still problems such as unreasonable economic structure, insufficient market construction, single product category, low utilization rate and urgent construction of relevant judicial guarantee system. Therefore, the system should be improved at the economic level and the legal level. The economic level includes adjusting the layout of economic development structure, strengthening the construction of market infrastructure, encouraging the diversification of carbon financial products and strengthening publicity and education promotion strategies. The legal level includes improving the top-level design, formulating judicial interpretation to promote carbon financial trading, promoting commercial law amendment, and promoting the linkage mechanism between specialized environmental justice and carbon finance and other safeguard measures. Finally, improving the carbon finance system is required to promote and protect the orderly development of carbon finance. To promote the reform of the pattern of economic development, the concept of ecological and environmental protection in the financial sector needs to be implemented to form an overall pattern of pollution reduction, carbon reduction and synergistic efficiency improvement.

We (re)evaluate the general-equilibrium effects of (environmental) policies from the perspectives of input-output networks and firm dynamics and heterogeneity. Using China’s carbon emission trading system (ETS) as an example, we find that ETS leads to more patent applications, especially the ones associated with low-carbon technologies in the targeted sectors. The effects are muted at the firm level due to selection effects, whereby only larger firms are significantly and positively affected. Meanwhile, larger firms occupy a small share in number but a large share of aggregate outcomes, contributing to the discrepancy between the effects of ETS at the individual firm and aggregate sector levels. The effects also diffuse in input-output networks, leading to more patents in upstream/downstream sectors. We build and estimate the first firm dynamics model with input-output linkages and regulatory policies in the literature and conduct policy experiments. ETS’s effects are amplified given input-output networks.

Taking the national carbon market and seven local carbon markets in China, we use DEA model to measure market efficiency, and then classify them by hierarchical cluster method. Efficiency of the national carbon market and local carbon markets of Beijing, Shenzhen, Hubei and Shanghai are leading, while Guangdong is in the middle; Chongqing and Tianjin are left behind. Room for improvement and scale returns are further analyzed, and suggestions for each carbon market are proposed finally.

The pilot carbon emission trading schemes (ETSs) of China were created to combat climate change in a cost-effective and economically efficient manner, and their potential impact on regulated firms has drawn increasing attention. This study is conducted to provide empirical evidence on the effect of China’s pilot ETSs on firm-level financial performance during the period from 2008 to 2017. The empirical results show that the ETS pilots have a positive impact on firms’ profitability and value, and a negative impact on operational costs. We also find that the ETS pilots improve total factor productivity (TFP) but that changes in technology have an indirect suppressing effect on the relation between the ETS and short-term financial performance, providing support for the weak version of the Porter Hypothesis. Further, we show that the carbon emission price has a negative impact on firms’accounting-based performance but increases firms’ market value. Finally, we find evidence that, in contrast to state-owned enterprises (SOEs), non-SOEs do not experience significant improvements in their financial performance, led by the ETS pilots. Our findings have policy implications for firms’sustainable development and the transition to a low-carbon economy.