The Impacts of Carbon Policy and “Dual Carbon” Targets on the Industrial Resilience of Ferrous Metal Melting and Rolling Manufacturing in China

Abstract

Greenhouse gas emissions are a major factor contributing to global climate change and have received extensive attention from policymakers worldwide. As a cornerstone of China’s industry and a critical foundation of the global manufacturing sector, the introduction of carbon policies could increase production costs and reduce international competitiveness, thereby impacting its stable development. How can carbon emissions be reduced to meet the environmental standards of the international community while maintaining global market competitiveness? This paper develops a comprehensive set of indicators to assess the industrial resilience of the ferrous metal smelting and rolling industry. These indicators focus on the industry’s development capacity, market demand transformation, potential for technological innovation, and ability to adapt to external shocks and recover autonomously. Using the difference-in-differences (DID) model, it quantifies the effects of carbon policies from China and the EU on the industry’s resilience and examines adaptation mechanisms within the industrial chain. It is found that ferrous metal smelting and rolling industrial resilience has been strengthening, significantly influenced by national research and experimental development (R&D), gearing ratio, and government science and technology investments. China’s domestic carbon policies and the EU’s carbon policy have profoundly impacted the resilience of China’s ferrous metal industry, fostering green innovation and the transition to a low-carbon economy while ensuring industrial stability and competitiveness.

1. Introduction

As global warming garners more international focus, greenhouse gas emissions have become a central concern for policymakers due to their significant impact on climate change. Consequently, reducing carbon emissions is now a critical task globally. As a major emitter, China has significant responsibilities for reducing emissions. As a result, China committed to a “double carbon” goal in September 2020, targeting peak carbon emissions by 2030 and carbon neutrality by 2060. Achieving these targets will necessitate substantial economic transformations, particularly in energy-intensive industries. The ferrous metal smelting and rolling industry, which involves processing iron ore into pig iron, melting pig iron into steel billets, and then rolling these billets into steel plates or various profiles, is critical to the manufacturing sectors of various countries. It forms a vital foundation of global manufacturing industry but is also among the most energy-intensive and high-emission industries. With strengthening carbon policies, this industry may face increased production costs and market risks, potentially undermining its international competitiveness and impacting its stable development.

Given the carbon constraints, this industry faces significant challenges: it must reduce emissions to meet international environmental standards while maintaining global competitiveness. The implementation of carbon policies could increase production costs, potentially reducing its international competitiveness and impacting its stable development [1]. And academics usually use industrial resilience to measure and reflect an industry’s ability to resist risk and maintain sustainable development under the impact of various external factors. The more resilient an industry chain is, the more effectively it can adapt to policy changes and maintain operational efficiency and market competitiveness [2]. Therefore, the pressing issue is how to enhance the resilience of the industry while achieving the “dual carbon” goals, ensuring the industry’s stable development and maintaining its international competitiveness. For example, compared with those of developed countries, China still has significant room for improvement with regard to production technology and ecological safeguarding criteria. For example, China still focuses on blast furnace steelmaking, as opposed to electric furnace steelmaking, which is widely used in Europe and the United States, and the former does not perform as well as the latter in terms of energy efficiency and carbon emissions. Although China has advanced in technological development and green transformation, the gap is still obvious when compared with international advanced levels, and there is a need to increase investment in R&D to promote the adoption of technologies that conserve energy and reduce emissions, including electric arc furnace steel production and continuous casting, along with the investigation into advanced technological solutions, such as hydrometallurgy, in order to reduce dependence on fossil fuels [3].

Therefore, China’s ferrous metal smelting and rolling industry, with its high energy consumption and emissions, conflicts with global climate goals; especially under the EU carbon policy that heightens export pressures, the industry must balance market share with significant reductions in energy and emissions to meet stringent environmental policies. The industry can enhance its resilience, undergo transformation and upgrading, and advance towards a green and low-carbon development path [4].

In the context of global carbon emission reduction, the research on related policies in different countries shows a diversified trend, especially in the exploration of the impacts of carbon policies on industrial resilience, and scholars around the world have increasingly researched how to promote the transition of industries to low-carbon ones through policy tools. Steenkamp argued that carbon policies, especially carbon taxes and carbon pricing, not only constrain resource-concentrated heavy industrial emissions and improve the environment, but also have a positive impact on government revenues [5]. Mechouar et al. studied industrial firms and environmental regulations to discuss and analyze the impacts of carbon policies on the supply chains of industrial firms in their article, and they concluded that higher carbon taxes are more likely to lead to significant changes in production decisions [6]. Morgenstern found that only a few industries in the manufacturing sector would bear a disproportionate short-term burden of a carbon tax or similar policy [7]. Some employ a grey model with a fractional-order cumulative generating operator to analyze the impact of supply-side structural reforms on the development trends of ferrous metal smelting and rolling processing enterprises. The forecast indicates a decrease in the number of enterprises, inventory, finished products, and assets and liabilities, while the industry’s revenue scale is expected to increase. These findings provide valuable insights for policymakers and industry investors [8]. Qiu’s research indicates that strong national policies have spurred rapid development in the ferrous and non-ferrous metal industries by eliminating outdated facilities, optimizing structures, and improving resource utilization. The study introduces a system of 13 indices to evaluate the financial health and investment value of listed companies in these sectors. Through factor and cluster analysis, it assesses various companies and provides investment rankings, offering valuable insights for investors to minimize risks and enhance returns [9].

In conclusion, the resilience of China’s ferrous metal smelting and rolling industry is critical not only for the survival and development of enterprises but also for the nation’s economic security and sustained growth capabilities. Existing studies, as discussed by the authors of [10], have evaluated the economic impacts of carbon policies from various perspectives, yet there remains a lack of deep insight into how enterprises can design and manage their supply chains based on resilience principles. These studies have not focused specifically on industry resilience, particularly within the specialized sector of ferrous metal smelting and rolling. In light of this, this paper focuses on the resilience of China’s ferrous metal smelting and rolling industry under carbon policies, aiming to deeply understand the impacts of these policies, evaluate the adaptability of the industry chain, and explore strategies to enhance resilience. This research intends to provide both theoretical and empirical support for policy-making and business decisions under the “dual carbon” targets.

This paper uses both quantitative and qualitative methods to explore the multifaceted impacts of carbon policies on the resilience of the ferrous metal smelting and rolling industry. It assesses resilience by evaluating the industry’s capacity for self-development, response to market demand shifts, and potential for technological innovation. The research will identify vulnerabilities in the industry chain to propose strengthening measures, thus enhancing adaptability and shock resistance to ensure the industry’s sustainable development. Additionally, the difference-in-differences (DID) model will measure the effects of domestic and international carbon policies on industry resilience and adaptation mechanisms. Strategic recommendations will then provide policymakers and business managers with guidance to support a green, low-carbon transition while maintaining industry stability and competitiveness. This approach aims to enhance informed decision-making to strengthen industry resilience in the face of environmental policies.

2. Methodology

2.1. Comprehensive Indicator System for Supply Chain Resilience in Ferrous Smelting and Rolling Manufacturing

The purpose of this paper is to construct a comprehensive index system with which to assess the industrial chain resilience of ferrous metal smelting and rolling manufacturing in China, and then to empirically analyze the resilience of the ferrous metal manufacturing industry in China under the “dual carbon” and EU carbon policies. According to Martin’s research on “adaptive resilience”, we understand that, under uncertainty, the industry is not as resilient as it should be; therefore, the resilience of the metal smelting and rolling manufacturing chain is not only manifested in the upstream supply and downstream consumption recycling capacity, but also includes risk resistance, developmental capacity, environmental risks, and renewal capacity.

In the framework of this research, risk-resistant capacity reflects the industry chain’s ability to cope with external shocks; development capacity reflects the industry chain’s ability to adjust and optimize its structure in a changing environment; environmental risk demonstrates the negative impacts of the ferrous manufacturing on the external environment; and updating capacity embodies the industry chain’s ability to update, innovate, and transform itself after experiencing shocks [11] (Figure 1).

In order to specify these capabilities, this paper, following the framework of Lenort and Wu‘s research [12,13], combined with the characteristics of the ferrous metal industry and the background of the national “dual-carbon” target, comprehensively considered a number of dimensions, such as the economic level, supply capacity, industrial foundation, market environment, recycling sustainability, input and output of innovation, and the dynamic changes in the supply chain resilience of ferrous metal manufacturing, which are affected by a variety of factors, including supply and demand relations, price fluctuations, changes in the external environment, etc. Starting from the financial status of industrial enterprises above the scale, risk resistance, carbon emission level, technological innovation, etc., we constructed an evaluation system covering 4 primary indicators, 15 secondary indicators,18 tertiary indicators and systematically analyzed these key factors in order to measure the intrinsic resilience of the ferrous metal manufacturing mechanisms and external conditions, as shown in

Table 1. Comprehensive index system of supply chain resilience for ferrous metal melting and rolling manufacturing in China.

First-Level Indicators		Second-Level Indicators		Specific Indicators		Indicator Attribute
Resilience	A1	Gearing ratio	B1	Gearing ratio	C1	Negative
		Product inventory turnover days	B2	Inventory turnover (%)	C2	Positive
		Accounts receivable turnover days	B3	Accounts receivable turnover (%)	C3	Positive
		Supply chain security index	B4	Import dependency	C4	Negative
				Export dependence	C5	Negative
				Supply concentration	C6	Negative
				Composite index of scale of supply and competitive influence	C7	Positive
Capacity development	A2	Main operating costs	B5	Main business costs of industrial enterprises above designated size (CNY billion)	C8	Negative
		Investment income	B6	Total profit of ferrous metal smelting and rolling processing industry (CNY billion)	C9	Positive
		Net assets	B7	Total assets of industrial enterprises above designated size (CNY billion)	C10	Positive
		Dominant comparative advantage	B8	Dominant competitive advantage in upstream, midstream and downstream trade	C11	Positive
		Trade competitive advantage	B9	Trade competitive advantage in upstream, midstream and downstream trade	C12	Positive
Environmental risk	A3	Wastewater discharge	B10	Total industrial wastewater discharge (tonnes)	C13	Negative
		Exhaust emissions	B11	Total industrial emissions (billion cubic metres)	C14	Negative
		Solid waste	B12	Total solid waste generation (tonnes)	C15	Negative
Renewal of capacity	A4	Full-time equivalent	B13	Full-time equivalent of national research and development (R&D) personnel (tens of thousands CNY/year)	C16	Positive
		Applied Research	B14	National financial expenditure on science and technology (CNY billion)	C17	Positive
		R&D provision	B15	Internal expenditure on national research and experimental development (R&D) funding (CNY billion)	C18	Positive

(See Supplementary Materials for details of the basis for the selection of indicators).

2.2. Evaluation Methodology—Entropy Weight Method

The aim of this paper is to construct a comprehensive index system for assessing the supply chain toughness of ferrous smelting and rolling manufacturing in China. In order to compare data of different sizes and scales, and to enhance the applicability and accuracy of the model, this study only uses the z-score standardization method to standardize the basic data, the methodological steps of which are as follows:

(1) Raw data standardization: the mean and standard deviation of each evaluation indicator are first calculated, and then the following z-score standardization formula is applied to each data point:

$${z }_i= {\displaystyle \frac{\left(x_i – {\mu }_j\right)}{{\sigma }_j}}$$

Here, z_i denotes the standardized value of the i_th sample on the j_th evaluation indicator, x_i is the raw data, µ_j is the mean of the j_th evaluation indicator, and σ_j is the standard deviation.

(2) The entropy value is calculated as follows:

$${e }_j=- {\displaystyle \frac{1}{ln m}}{\sum }_{t=1}^m{f}_{tj} {ln f}_{tj}$$

Here, e_j denotes the entropy value; f_tj denotes the characteristic weight at year t corresponding to the j_th evaluation index; and

$${f }_{tj}={\displaystyle \frac{\left( z_{tj}\right)}{{\sum }_{t=1}^m{z}_{tj} }}$$

(3) The weights are determined. The equation for determining the weight of the j_th indicator is as follows:

$$w_{1j}={\displaystyle \frac{\left(1– e_j\right)}{{\sum }_{t=1}^m\left(1– e_j\right) }}$$

0 ≤ $w_{1j}$ ≤ 1, = 1 ${\sum }_{j=1}^n{w}_{1j}$ = 1

Here, 1 − $e_j$ denotes the coefficient of variation for the jth evaluation indicator.

By standardizing the raw data into a z-score, this study ensures that variables of different sizes or units are compared on the same scale, thereby improving the accuracy and reliability of the assessment model. This is essential to gain insight into the internal mechanisms and external conditions that affect the resilience of supply chains in the ferrous smelting and rolling sector. The z-score denotes the number of standard deviations of the indicator value relative to the mean; the standard error reflects the precision of the estimated quantity; and the R² value indicates the explanatory power of the indicator in the model. The weighting results are calculated as shown in

Table 2. Characteristics of each evaluation indicator standardized to z-scores.

Term (in a Mathematical Formula)	Information Entropy Value e	Information Utility Value d	Weighting (%)
Inventory turnover (%)	0.897	0.103	4.107
Accounts receivable turnover ratio (%)	0.929	0.071	2.812
Composite index of scale of supply and competitive influence	0.54	0.46	18.365
Total profit of ferrous metal smelting and rolling processing industry (CNY billion)	0.93	0.07	2.812
Total assets of industrial enterprises above designated size (CNY billion)	0.937	0.063	2.505
Competitive advantage in upstream trade	0.924	0.076	3.048
Competitive advantage in midstream trade	0.927	0.073	2.904
Competitive advantage in downstream trade	0.95	0.05	2.013
Upstream dominant comparative advantage	0.878	0.122	4.851
Midstream dominant comparative advantage	0.88	0.12	4.778
Downstream explicit comparative advantage	0.861	0.139	5.544
Full-time equivalent of national research and development (R&D) personnel (tens of thousands CNY/year)	0.914	0.086	3.433
National financial expenditure on science and technology (CNY billion)	0.896	0.104	4.133
Internal expenditure on national research and experimental development (R&D) funding (CNY billion)	0.881	0.119	4.756
Gearing ratio	0.886	0.114	4.561
Upstream import dependence	0.952	0.048	1.899
Midstream import dependence	0.964	0.036	1.455
Downstream import dependence	0.942	0.058	2.313
Upstream export dependence	0.964	0.036	1.428
Midstream export dependence	0.96	0.04	1.583
Downstream export dependence	0.956	0.044	1.752
Upstream supply concentration	0.897	0.103	4.095
Midstream supply concentration	0.911	0.089	3.548
Downstream supply concentration	0.925	0.075	3
Main business costs of industrial enterprises above designated size (CNY billion)	0.945	0.055	2.193
Total industrial wastewater discharge (tonnes)	0.98	0.02	0.796
Total industrial emissions (billion cubic metres)	0.96	0.04	1.589
Total solid waste generation (tonnes)	0.907	0.093	3.727

, below.

Overall, the z-score values of the indicators are mostly close to 1, indicating that most of the indicator values are slightly higher than the average, which may mean that, in these areas, the ferrous smelting and rolling sector as a whole is performing well, or is taking measures to adapt to the carbon policy. The standard errors are generally small, suggesting that the reliability of the estimates for these indicators is high. The R² values, on the other hand, are spread between 0.796 and 18 percent, indicating a wide variation in the contribution of different indicators in explaining industry resilience.

Indicator importance ranking: the following figure shows the importance ranking of the indicators (in descending order) in the form of a histogram (Figure 2).

The indicator “Composite index of scale of supply and competitive influence”, at 18.37 percent, indicates that it is the most critical indicator when assessing industrial resilience. The indicator “total industrial wastewater discharges”, at 0.796 percent, has a relatively small impact on industrial resilience among all the indicators considered.

2.3. Research Design

2.3.1. Modelling

In this work, the carbon policies of China and the EU are taken as exogenous shocks, and the causal effect of carbon policy on the resilience of the ferrous industry is examined using the double-difference method.

In summary, the following econometric model was set up:

SCIR_it =α + β₁ CCP_it +β₂ ECP_it +β₃ CR_it +β₄ FMP_it +Year +ε_it

In this model, SCIR_it is an explanatory variable indicating the level of industrial resilience of the ferrous metal smelting and rolling industry in year i; CCP_it denotes the dummy variable before and after the implementation of China’s carbon policy, which takes the value of 1 in 2016 and after, and 0 otherwise; ECP_it denotes the dummy variable before and after the implementation of Europe’s carbon policy, which takes the value of 1 in 2019 and after, and 0 otherwise. CR_it represents the capital ratio, assessed by the ratio of state capital to paid-in capital; FMP_it indicates ferrous metal price; CR_it and FMP_it are control variables; year stands for year fixed effects; ε_it denotes the random error term.

Table 3. Overview of variables and summary statistics.

Notation	Variant	Definition	Observed Value	Average Value	(Statistics) Standard Deviation	Minimum Value	Maximum Value
SCIRit	Industry chain resilience	Ferrous metal smelting and rolling industry toughness level for industry in year i	504	0.4801	0.09831	0.40731	0.70981
CCPit	Chinese policy dummy variables	Dummy variables before and after carbon policy implementation in China	504	0.3888	0.50168	0	1
ECPit	European policy dummy variables	Dummy variables before and after the implementation of the European carbon policy	504	0.1667	0.3835	0	1
CRit	Capital ratio	State capital to paid-in capital ratio	504	0.2589	0.0719	0.1658	0.4023
FMPit	Ferrous metal prices	Ferrous metal prices	504	109.7385	18.9301	66.8324	143.0963

presents the summary statistics of variables.

The model analyzes the impacts of different indicators on the resilience of the entire ferrous metal industry and controls for other factors that may affect supply chain resilience. This is important for understanding and improving industry resilience, especially in the face of policy changes, environmental challenges, and market volatility.

2.3.2. Variable Setting

(i) Explained variables

The industrial toughness level of the ferrous metal smelting and rolling industry (SCIR_it), according to the definition of toughness, and combined with the research results of the existing literature, would usually be expressed as the resistance and resilience of the industrial chain to external shocks [14,15]. In this research, through the entropy weight method, 15 indicators under the four dimensions of industrial resilience, development capacity, risk resistance capacity, and environmental risk renewal capacity were comprehensively measured, and the result is the industrial resilience sought through this work.

(ii) Core explanatory variables

Taken as the dummy variables were China’s carbon emission-reduction policy (CCP_it) and European carbon policy (ECP_it), considering that the ferrous sector is among the industries with the highest concentrations of energy use and carbon dioxide emissions, and the introduction of carbon policies may lead to increases in production costs, which may affect the long-term development of enterprises.

(iii) Control variables

To empirically test the industrial resilience of the ferrous metal industry, the impacts of the selected capital ratio (CRit) and ferrous metal prices (FMPit) were taken as control variables. The capital ratio is the proportion of state-owned capital to paid-in capital of the enterprise, reflecting the degree of response of the enterprise to state policy when the state policy is proposed. Ferrous metal price (FMPit) was taken as a reflective indicator of the degree of response of ferrous metal products to market changes, reflecting the ability of the ferrous metal industry to resist market risks.

(iv) Data sources

This research is based on data from 2004 to 2021, which were sourced from the China Industrial Statistical Yearbook, China Science and Technology Statistical Yearbook, China Price Statistical Yearbook, and the China Statistical Yearbook, and interpolation was used to address individual missing items. The capital ratio is the ratio of national capital to paid-in capital.

3. Results

3.1. Comprehensive Score of Industrial Toughness of Ferrous Metal Smelting and Rolling Industry

The chart shows the industrial toughness index of the ferrous metal smelting and rolling industry in China from 2004 to 2021. By looking at the annual data, the trend of industrial toughness over time can be clearly seen.

Figure 3 presents data showing the trend in resilience of the ferrous metal smelting and rolling industry from 2004 to 2021, which reveals two distinct phases: a stable period from 2004 to 2016 and a growth period from 2016 onwards. Between 2004 and 2016, the resilience index of the industry remained relatively stable, with an average value of 0.425 and fluctuations ranging from 0.3 to 0.68. This stage displayed a low annual average growth rate in resilience, reflecting the industry’s relative stability during this period with minimal impact from economic and policy changes. Starting in 2016, the resilience index began to rise significantly, reaching a peak of 0.68 by 2021. The average growth rate during this period was higher than in the previous stage. Overall, despite some fluctuations in certain years, the resilience of the ferrous metal smelting and rolling industry generally showed a steady upward trend. This ongoing rise indicates enhanced adaptability and competitiveness in the industry in response to global and domestic economic changes as well as environmental policy pressures.

The increase in industry resilience is mainly due to the following three factors: technological innovation and efficiency gains, the positive impact of carbon policies, and the adaptation of the market and policy environment. Firstly, technological innovation and efficiency improvement: technological innovation plays a key role in enhancing the resilience of the ferrous metal smelting and rolling industry. Continuous technological innovation and production efficiency improvement within the industry enables companies to be more efficient in cost management and resource utilization, which directly enhances the industry’s economic sustainability and environmental resilience.

Second, the positive impact of carbon policy: carbon policy is not only a tool for environmental management, but also a key factor in promoting industrial adaptation and resilience. Carbon trading pilot policies have promoted low-carbon technological progress and, in turn, the low-carbon international competitiveness of industries [16]. China’s carbon trading market, which has been in place since 2014, provides strong economic incentives for firms to adopt cleaner and more efficient production technologies. According to a 2021 study by the China Academy of Environmental Sciences, this policy has already resulted in an average 15 per cent reduction in carbon intensity and an 18 per cent increase in productivity for participating firms. This policy not only promotes the optimization of energy use, but also improves the responsiveness of the industry as a whole to policy changes and shifts in market demand.

Meanwhile, in Europe, the Carbon Emissions Trading System (ETS), which has been in place since 2005, has forced companies to reduce their carbon emissions through a pricing mechanism that promotes the widespread adoption of cleaner technologies. The European Environment Agency’s 2020 report notes that the implementation of the ETS has already helped the steel industry achieve significant reductions in carbon emissions, by an average of 22 per cent, which was achieved through the adoption of electric arc furnace technology and renewable energy. In addition, carbon policies have incentivized companies to develop new products and marketing strategies to adapt to stricter environmental standards in order to maintain competitiveness in the global market. Finally, adaptation to market and policy environments: the ferrous metal smelting and rolling industry has demonstrated remarkable adaptability and flexibility through its rapid response to market changes and policy adjustments. This responsiveness is mainly manifested in the positive adaptation to carbon policies, especially in the context of China’s carbon trading market and the European Union’s Emissions Trading System (ETS). These policies, through economic incentives and regulatory requirements, are driving companies to adopt greener and more efficient production technologies to reduce carbon emissions and address the challenges of global climate change.

Despite facing global economic fluctuations and a constantly changing policy environment, the ferrous metal smelting and rolling industry has successfully enhanced its internal capabilities and responded proactively to external changes. This has significantly strengthened the industry’s resilience, laying a solid foundation for potential future challenges. The continuation of this trend will play a crucial role in sustaining the long-term development and competitiveness of the industry.

3.2. Benchmark Regression Results

Table 4. Empirical results and analysis.

Name	Y1
ccp	0.1150 ***
	(−0.0225)
ecp	0.1136 ***
	(0.0307)
cr	−0.1234
	(0.1289)
fmp	−0.0003
	(0.0004)
pi	0
R-squared	0.9086
Adj. R-squared	0.8805

Note: *** p < 0.01.

below displays the outcomes of the benchmark regression based on the model.

Based on the findings from the double difference (DID) model analysis, in conjunction with the effects of China’s carbon policy, the EU carbon policy, the capital share, and steel prices on the industrial toughness of the ferrous smelting and rolling industry, the following conclusion can be drawn (Figure 4):

• China’s carbon policy exerts a notably positive impact on the comprehensive assessment, with a coefficient of 0.1145 and a p-value of <0.001, This demonstrates that since the launch of China’s carbon policy pilot in 2014, the policy’s implementation has significantly improved the overall performance of the industry. Beginning in 2018, the Chinese government has fully promoted the carbon emissions trading system (ETS), which mandates emission caps and allows for nationwide carbon credit trading. This measure has directly contributed to technological innovation and the optimization of energy use in companies. The policy not only aligns with both domestic and international carbon reduction goals but also compels ferrous metal smelting and rolling companies to adopt more efficient production technologies and energy management systems. By integrating domestic air quality management with carbon trading, the policy helps firms meet increasingly stringent environmental regulations and avoid potential carbon tax liabilities. This technological innovation directly enhances the competitiveness of firms in the marketplace, allowing them to respond more effectively to external economic and policy pressures, thereby increasing the resilience of the industry as a whole. This suggests that China’s carbon policy has been successful in integrating environmental protection objectives with industrial development and promoting sustainable industrial development.
• The EU carbon policy also exerts a notably positive impact on the comprehensive assessment on the composite evaluation, with a coefficient of 0.0571 and a p-value of 0.003. This highlights the significant positive impact of the EU’s Emissions Trading System (ETS) on the ferrous metal smelting and rolling industry since its implementation in 2005. The EU’s ETS, the world’s first and most developed carbon market, compels companies to reduce emissions by setting a cap on carbon emissions and allowing the trading of carbon credits. It also incentivizes the adoption of cleaner energy and green technologies. This policy framework places particular emphasis on technological innovation and productivity improvements, such as waste heat recovery and recycling technologies, which have significantly enhanced the environmental resilience of industries [17]. Given the close trade links between China’s ferrous metal smelting and rolling industry and the EU, the EU’s carbon policy not only affects the export market environment for Chinese enterprises but also encourages them to enhance their adaptability to environmental changes. This, in turn, promotes the low-carbon transformation and sustainable development of the industry chain. Thus, the EU’s carbon policy not only boosts the industry’s international competitiveness but also makes a significant contribution to global environmental protection.
• Capital share and steel price, as control variables, do not have significant effects on the overall evaluation, with p-values of 0.356 and 0.516, respectively. In the capital-intensive ferrous metal smelting and rolling industry, excessive investment in fixed assets may reduce a company’s ability to respond quickly to market changes. A high proportion of fixed assets can make it difficult for enterprises to remain flexible when adapting to carbon policies and shifts in market demand. Moreover, although the cost of raw materials is a significant factor, the resilience of the industry is more profoundly influenced by internal management, technological innovation, and strategies for adapting to policies. This indicates that the ferrous metal smelting and rolling industry has effectively mitigated the impact of price fluctuations through various mechanisms, such as risk management strategies and the diversification of the supply chain.

Figure 4. Logic diagram of regression results.

Figure 4. Logic diagram of regression results.

The model demonstrates strong explanatory power (adjusted R-squared = 0.9086), effectively capturing changes in the resilience of the ferrous metal sector. China administers its carbon regulation through an Emissions Trading System (ETS) that sets emission caps and facilitates carbon credit trading, while the European Union promotes clean energy and green technologies to advance its carbon policies. These initiatives have spurred technological advancements such as enhanced production efficiencies, waste heat recovery, and recycling, which together reduce carbon emissions and improve energy utilization. These technologies and policies not only enhance the enterprises’ ability to adapt to external economic and policy changes but also improve the environmental sustainability of production processes and product quality, significantly boosting the industry’s resilience. Collectively, the carbon policies of China and the EU effectively align environmental protection goals with industrial development, driving the industry towards sustainable transformation. Additionally, variations in capital allocation and metal prices critically affect the economic structure and market positioning of the ferrous metal industry, highlighting the importance of adapting to carbon policies and adopting advanced environmental technologies as key strategies for promoting sustainable industrial growth [18]. However, it should be noted that the model may have strong multicollinearity problems, and the design matrix is singular, which may be due to the complete covariance between the integrated carbon policy and other independent variables. Therefore, the data and model settings should be further reviewed to guarantee the precision and dependability of the analyses.

3.3. DID Model Validity Test

(i) To verify the model’s robustness, an attempt was made first to exclude extreme values.

In this paper, we identified possible extreme values by examining the distribution of the “composite evaluations” and excluding those observations that were far from the mean, and then rerunning the DID model after excluding these extreme values.

The distribution of the “industry resilience composite score” is detailed in Figure 5, below.

The box plot shows the distribution of the “industry resilience composite score” to help identify possible extreme values. Based on the three standard deviation principle, the boundaries for extreme values were calculated to be approximately 0.412 (lower limit) and 0.787 (upper limit).

Possible extreme values were excluded from the data based on these bounds, and the DID model analysis was rerun. This process helps to validate the sensitivity of the model results to extreme values.

The rerun of the DID model analysis after excluding the extremes showed very similar results to the previous analysis, as follows:

• The positive impacts of China’s carbon policy and the EU’s carbon policy on the comprehensive evaluation remain significant, with coefficients and p-values consistent with previous analyses. This is further evidence that the conclusion that these variables have significant positive impacts on the comprehensive evaluation is robust.
• The effects of the control variables “capital share” and “steel price” on the overall evaluation remain insignificant, in line with the outcomes from the prior analysis.
• The explanatory power of the model (adjusted R-squared of 0.865) and the overall significance of the model (p-value of the F-statistic) remain unchanged, indicating that the model fits the data well.

Overall, this robustness test further confirms that the model is robust, i.e., that China’s carbon policy and the EU’s carbon policy have significant positive impacts on the industrial resilience of the ferrous metal industry. The exclusion of extreme values did not significantly change the results of the model, which suggests that the analyses are not sensitive to extreme values.

(ii) A test was conducted by changing the mix of control variables. Specifically, an attempt was made to remove some of the control variables, such as “capital share”, and then “steel prices”, and the results of the changed model are shown in Table 5:

• The positive impact of China’s carbon policy on the overall evaluation remains significant, with a slight increase in the coefficient to 0.1166 and a p-value of <0.001, indicating a relatively stable result.
• The positive impact of the EU carbon tax policy also remains significant, with a slight increase in the coefficient to 0.0608 and a p-value of 0.002, further validating its positive effect on the overall evaluation.
• The coefficient for steel prices is similar to that in the previous model, but still insignificant (p-value = 0.400), suggesting that its effect on the composite evaluation is not significant.

After removing the “capital share” variable, the adjusted R-square of the model slightly decreases (from 0.908 to 0.869), but still shows high explanatory power. This robustness check suggests that our main finding (that China’s carbon policy and the EU’s carbon tax policy have significant positive effects on the overall evaluation) is robust, and that the results are not significantly affected by the inclusion or exclusion of the control variable “capital share”.

(iii) Since the impacts of policy changes may not be immediately apparent, it was considered to introduce a lag term (e.g., one-year lag) for CCP and ECP into the model, i.e., adding a linear time trend variable and a lag term of the policy variable to conduct robustness tests. This would not only control for the potential impact of time but also help to examine the delayed nature of policy effects [19].

Table 5. Regression results of DID model with lagged variables added.

Name	Y2
ccp	−0.0085
	(0.0351)
ecp	0.0599 *
	(0.0292)
cr	0.4361
	(0.2440)
fmp	0.00008
	(0.0005)
pi
CCP_Lag	0.0448
	(0.0391)
ECP_Lag	0.0376
	(0.0306)
timetrend	0.0145 **
	(0.0060)
R-squared	0.9685
Adj. R-squared	0.9439

Note: * p < 0.10, ** p < 0.05.

Table 5. Regression results of DID model with lagged variables added.

Name	Y2
ccp	−0.0085
	(0.0351)
ecp	0.0599 *
	(0.0292)
cr	0.4361
	(0.2440)
fmp	0.00008
	(0.0005)
pi
CCP_Lag	0.0448
	(0.0391)
ECP_Lag	0.0376
	(0.0306)
timetrend	0.0145 **
	(0.0060)
R-squared	0.9685
Adj. R-squared	0.9439

Note: * p < 0.10, ** p < 0.05.

Time_Trend: The coefficient is 0.0143 with a p-value of 0.033, which indicates that industrial resilience shows a positive trend of growth over time, and this result is statistically significant.

CCP_Lag and ECP_Lag: The coefficients and p-values of these variables indicate that their impacts on industry resilience are not significant after considering the lagged effects of policy changes.

Time trend is an important factor affecting industry resilience, while the direct impacts of policy variables may be disturbed by other factors or demonstrate some time lag. In this work, by adding time trend variables and lagged terms of policy variables, we tested the robustness of the original model. This approach takes into account not only the effect of time, but also the possible time lags of policy effects. The results show that, although some variables are statistically insignificant, the time trend itself exerts a substantial positive effect on industrial resilience, possibly because, following the implementation of the carbon policy, the current period does make the enterprise cost increase and the efficiency decline; however, after long-term policy guidance, the enterprise eventually makes adjustments according to the carbon policy and reduces its carbon emissions by increasing green innovation and accelerating structural adjustment to enhance industrial resilience.

4. Conclusions and Recommendations

4.1. Conclusions

Through the evaluation of the industrial toughness of the ferrous smelting and rolling sector, it was found from the trend in changes in industrial toughness from 2004 to 2023 that the industry’s toughness shows fluctuating changes, sometimes with fast growth, sometimes with slow growth, but overall with positive growth. Especially from 2016 onwards, the speed of increase accelerated, indicating that the industrial toughness of the ferrous sector is increasing. The most important factors affecting industrial resilience are the national domestic spending on research and development (R&D), the gearing ratio, and the governmental financial outlay on science and technology, which shows that the resilience of ferrous metal smelting and rolling manufacturing in China mainly depends on scientific and technological innovation, in addition to the guidance of the government’s financial means, whereas the high gearing ratio leads to the possibilities of difficulty in financing, high risk, and lack of funds for green innovation and transformation in individual enterprises.

The carbon emission-reduction policy and the EU carbon policy have a significant impact on the resilience of China’s ferrous metal smelting and rolling industry. These policies influence firms’ capacity for development, innovation, and their ability to mitigate environmental and market risks. As a result, industry resilience has improved substantially, demonstrating the crucial role of carbon tax policies in guiding the green transformation of the industry. After adding the time trend and policy variable lag, although the direct impact of China’s carbon policy on industrial toughness is statistically insignificant, which also reflects the introduction of carbon policy, the current period will indeed increase the enterprise cost, reduce efficiency, and weaken industrial toughness; however, the long-term policy guidance aims to force enterprises toward green transformation to improve industrial toughness. However, the European carbon policy positively impacts ferrous smelting and rolling manufacturing in China toughness; that is, in order to maintain a market competitiveness advantage, China’s ferrous metal enterprises must take the initiative to adapt to changes in the international market through green transformation.

The impacts of market price and capital structure on the industrial resilience of the ferrous metal industry are not significant, indicating that, after many years of market-oriented development, this industry has tended to stabilize the market and its industrial organization, and it has already formed a perfect market risk prevention system.

4.2. Recommendations

Confronted with the dual challenge of worldwide climate change and the domestic “dual carbon” goal, the ferrous metal smelting and rolling sector must achieve its ecological modernization and advancement by adapting corporate strategies and harmonizing these with governmental policies. Adopting a greater focus on clean energy usage within the sector will become the principal strategy for future emission-reduction efforts, and this transformation will not only help the industry adapt to the new carbon emission-reduction requirements, but also open up new market opportunities and improve its overall international competitiveness.

First of all, policy support is key in promoting the green transformation of China’s ferrous metal smelting and rolling industry [20]. The government must formulate targeted emission-reduction policies based on the specific conditions of the industry and establish clear reduction targets and timelines to provide a framework for industry transformation. Additionally, increasing support for the research and development of new technologies—through innovation funds, tax incentives, and streamlined administrative processes—can help reduce the risks and costs to enterprises. This support will ease the economic burden of their initial transition, accelerate the adoption of cleaner technologies, lower energy consumption across the industrial chain, and mitigate the negative impact of carbon policies on the industry’s resilience [21]. Moreover, the proposal emphasizes the promotion of environmental protection and industrial upgrading through market mechanisms. Internalizing environmental costs through the implementation of a carbon policy or the establishment of a carbon trading market can encourage enterprises to find cost-effective solutions to reduce emissions. And the government ought to facilitate cooperative partnerships among businesses along the upstream and downstream parts of the industry chain, and even technological joint ventures with foreign enterprises, so as to form an industry-wide collaborative innovation mechanism and improve the recycling rate of resources. This is not limited to material resources, but should also include the recycling and optimal allocation of various resources, such as talents and capital. Such comprehensive integration across the chain can bolster the industry’s capacity to absorb external disturbances and strengthen the entire industry chain’s resilience.

At the same time, the enterprises themselves should strengthen their energy efficiency monitoring and emission quantification in their management strategy to ensure that each production link meets environmental requirements. In terms of material use, they should develop and promote the use of more environmentally friendly alternative materials, such as the use of a higher proportion of recycled materials such as scrap steel to reduce dependence on iron ore, while reducing energy consumption and emissions in the production process, and establish a mechanism for technical exchanges and co-operation with foreign ferrous metallurgical enterprises to introduce advanced production technology and management experience [22]. At the same time, actively promoting the formation of fair and reasonable international carbon market rules, would provide a guarantee for the international competitiveness of China’s ferrous metal smelting and rolling industry [23]. In addition, enterprises also need to strengthen the construction of supporting infrastructure projects, such as improving the efficiency of logistics, in order to reduce the operating costs and environmental impact of the entire industrial chain [24].

5. Discussion

5.1. Overall Assessment

This paper quantifies in detail the impact of carbon policies on industrial resilience in the ferrous metal smelting and rolling industry under different implementation contexts in China and abroad by using a double difference (DID) model. The results are consistent with a subset of assertions in the existing literature, and also provide comparisons and in-depth analytical discussions.

Comparison with existing studies shows that the results of this paper confirm the positive role of carbon policy in promoting technological innovation and environmental management practices, consistent with Kondo et al. (2019) [25], who found that carbon policy can stimulate innovation within enterprises. Contrary to Steenkamp (2021) [5], who argues that carbon policy weakens the international competitiveness of industries, this paper suggests that promoting technological innovation and improving production efficiency through carbon policy can enhance the resilience of the industrial chain and strengthen international competitiveness. Furthermore, in contrast to Gianoli et al.’s (2020) [26] concern that carbon policy may lead to industrial outflow, the findings of this research demonstrate that, with appropriate carbon policy guidance and market mechanisms, the ferrous metal smelting and rolling industry not only avoids negative economic consequences but also moves toward greater efficiency and environmental sustainability.

Further analysis in this paper reveals that, first, by raising production costs, carbon policies compel firms to adopt more cost-efficient production technologies, thereby driving technological innovation. This innovation extends beyond reducing energy consumption and emissions, encompassing improvements in production processes and product quality—both critical factors for enhancing industrial resilience. Second, carbon policies have encouraged long-term thinking in environmental management and strategic planning among enterprises [27]. Firms are increasingly considering how environmental protection measures can lead to long-term cost savings and better risk management, which strengthens their resilience to external economic and policy changes. Finally, while all carbon policies aim to promote environmental protection and sustainable development, there are significant differences in how specific policy designs, implementation efforts, and synergies with other environmental policies impact industrial resilience. This underscores the need to consider the specific characteristics of industries and the regional economic environment when formulating or adjusting carbon policies [28].

5.2. Research Limitations

This paper uses dummy variables to initially quantify carbon policy implementation in China and the EU but does not delve into the specific impact of carbon policy intensity on the resilience of the ferrous metal smelting and rolling industry. This is primarily reflected in two areas: first, the analysis does not address the effects of the intensity and scope of carbon policy implementation on carbon emissions and industry resilience. Second, there is a lack of evaluation of how carbon policies influence industrial restructuring, technological innovation, and overall market competitiveness. Future research should more deeply assess the strength and effectiveness of various carbon policies, particularly in terms of their contribution to emissions reduction and technological innovation within the ferrous metal smelting and rolling industry. Furthermore, future studies should explore the comprehensive impact of carbon policies on the resilience of the ferrous metal industry supply chain. By addressing these areas, future research can more thoroughly evaluate the specific contributions of carbon policies to the industry’s development, thereby providing a foundation for more effective policy strategies.