Lecture about Escaping to Green Heaven: Firm-level Evidence from the Carbon Border Adjustment Mechanism

Speaker: Li Fanghua (Assistant Professor, School of Applied Economics, RUC)

Li Fanghua is an assistant professor at the School of Applied Economics, Renmin University of China. She holds a PhD in economics from the University of California, Los Angeles. Her research interests include development economics, labor economics and applied econometrics. Many research results have been published in high level journals at home and abroad, such as Economic Research Journal, Social Sciences in China, Journal of Econometrics, and China Economic Review.

Time:

November 7, 2024, 11:00-13:00

Location:

Mingde Main Building, Meeting Room 405

Introduction:

This paper leverages the European Union's 2018 proposal of the Carbon Border Adjustment Mechanism (CBAM) as a natural experiment to examine the "Green Heaven effect"-whether policy signals of carbon tariffs incentivize energy-intensive firms to shift investments toward regions rich in green electricity. Linking subsidiary data of Chinese listed firms with pre-signal export data, we focus on exporters of high carbon products, defining firms exporting to the EU as the treated group, with others as the control, Generalized difference-in-differences (DID) regressions reveal that the CBAM policy signal significantly increases both the extensive and intensive margins of green-oriented investments among energy-intensive firms, This supports the idea that higher relative costs of carbon-intensive energy motivate firms to adopt green energy through relocation, reminiscent of the "Pollution Haven effect." Furthermore, linking firms with patent data shows a positive CBAM effect on alternative energy innovation correlating with relocations to green regions, Further analysis extends CBAM's impacts to smaller firms and indicates a highly persistent trend among firms with less myopic managers, suggesting sustained, long-term investment effects.