The Impact of SO(2) Emissions Trading Scheme on Firm’s Environmental Performance: A Channel from Robot Application

Improving the environmental performance of enterprises is the key to achieving the goal of energy conservation, emission reduction and green development. This paper investigates the causal impact on the firm’s environmental performance of China’s SO(2) emissions trading scheme (SO(2) ETS), a market-based environmental regulation. Different from the verification mechanism of the Porter hypothesis in the existing literature, we examine the micro mechanism of both emission reduction and efficiency gains of enterprises from the perspective of robot application based on Chinese firm-level data from 2000 to 2013. The paper found that SO(2) ETS significantly reduces the emission intensity of Chinese enterprises, and the results are still significant after a series of robustness tests and using instrumental variables to overcome the endogeneity problem. Mechanism analysis shows that the reduction of pollutant emissions and the productivity effect of robot application are two significant channels for SO(2) ETS to improve the firm’s environmental performance. In addition, in resource-based and recession-oriented cities, the SO(2) ETS has a more significant effect on enterprise emission reduction. These findings provide empirical evidence and policy enlightenment for enterprises to promote market-oriented environmental regulation and release institutional dividends in the process of industrial automation transformation, green and sustainable development.