Why the effectiveness of ETSs on green innovation differs? The perspective from price stabilization mechanisms
Peer-Reviewed Publication
Updates every hour. Last Updated: 9-Jan-2026 21:11 ET (10-Jan-2026 02:11 GMT/UTC)
Price stabilization mechanisms (PSMs), one of a set of key policy elements aiming at supporting increasing and stable carbon prices, may affect the performance of emissions trading systems (ETS) in terms of green innovation. By using the case of China’s regional carbon market pilots and data of listed firms, the research team found that pilots adopting both price-based and quantity-based PSMs significantly induced green innovation activities in covered firms, while a single type does not guarantee the effect. PSMs help to do so by lifting carbon prices and reducing firms’ perceived uncertainties. The above effects would be enhanced in firms with lower asset reversibility, lower ability of cost passthrough, higher ability of innovation, and state-owned enterprises.
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