Dr Juanjuan XIA

In the era of digital governance and data-driven sustainability, understanding how information-based market mechanisms influence corporate strategy is vital. Using a difference-in-differences model, this study examines the impact of carbon emissions trading schemes (ETS) on firms’ green investment and further distinguishes between preventive and treatment green investment. Results show that ETS significantly increases overall green investment and promotes both preventive and treatment green investment, with a stronger effect on preventive green investment. Mechanism tests indicate that financing constraints serve as an important mediating channel, while local law enforcement positively moderates the effect of ETS on green investment. The findings remain robust after controlling for concurrent policy shocks and spatial spillover effects. Spatial spillover tests also indicate that ETS promotes firms’ green investment in surrounding provinces within certain distance ranges. These findings demonstrate how the ETS reshape corporate sustainability decisions and offer policy implications for improving carbon market design and promoting low-carbon transition.