QUEEN’S BUSINESS SCHOOL FINANCE SEMINAR SERIES

Wednesday 4^th February

1pm

“Innovation and Market Entry: Effects of China’s Emissions Trading Scheme”

Thanos Andrikopoulos

University of Sussex

Abstract

This study examines how China’s pilot Emissions Trading Schemes (ETS) affect new firm entry, with particular attention to the role of innovation. Leveraging nationwide firm registration data and a triple-difference (DDD) identification strategy, we provide causal evidence that ETS implementation significantly reduces new firm formation in regulated industries. This effect is especially pronounced in regions characterized by high levels of green innovation and strong state-owned enterprise (SOE) dominance. By contrast, regions with robust power generation and manufacturing sectors exhibit more muted entry barriers. We show that carbon markets raise the innovation threshold for entry, amplifying perceived market risks and prompting firms to locate in less regulated areas. This relocation behaviour may induce carbon leakage and undermine policy effectiveness. Our findings reveal how environmental regulation can unintentionally reshape the innovation–entry nexus, with broader consequences for firm dynamics, capital allocation, and regional competitiveness. These insights carry important implications for designing climate policies that balance environmental objectives with innovation-driven economic growth.

Short bio

Thanos is an Associate Professor in Finance at the University of Sussex and Associate Fellow at the CRETA Centre, University of Warwick. Previously, he was Senior Lecturer in Finance and Undergraduate Programme Director at the University of Hull and earlier, worked at University of Birmingham and the Hellenic Ministry of Finance. His research covers international finance, banking, FinTech, applied econometrics and climate finance. His work has appeared in leading journals, including the European Journal of Operational Research, Journal of Banking and Finance, and Journal of International Money and Finance. He serves as an ad hoc reviewer for major international outlets.

QBS Student Hub, Interactive E-Learning (0G.044)