**7. Discussions, Conclusions, and Policy Recommendations**

Using China's CET policy as a quasi-natural experiment, we innovatively explore the effect of this policy on companies' market value. We investigate how the ETS scheme promotes companies' market value from the carbon price, technological innovation, and carbon disclosure angle. Additionally, we conduct a heterogeneity analysis of the marketization degree, industries, firm ownership, and different regions. We use the data of listed companies from the Chinese stock "A" markets and match the data with patent and green patent data from the CNRDS platform. We employ the DID method to account for the unobserved cause of the CET policy regarding companies' market value. Understanding this mechanism is important for advancing the performance of the carbon markets in China and potentially those in other developing countries that consider emission trading in their policy mix. The results of our study will help policymakers take full account of matching and coordinating existing laws, rules, and various policy instruments to create synergies. In addition, the findings of this study may be important for investors to optimize their decision-making and enhance their market value under the ETS mechanism.

Through theoretical and empirical analysis, we drew a series of conclusions:


carbon prices have a greater impact on the market value of companies in high-carbon industries. The mechanism analysis of technological innovation reveals that the CET policy has promoted green innovation considerably, and the improvement of green innovation can significantly increase companies' market value. The mechanism analysis of carbon disclosure shows that carbon disclosure plays a negative role in the mechanism by which the CET policy affects companies' market value, and that the reduction effect in the market value of high-carbon industries is less than that of low-carbon industries.


Our findings have important implications for regulators, policymakers, investors, and managers.

First, China's CET market's carbon pricing mechanism needs to be further improved to form a reasonable and effective carbon price. For the carbon market, a reasonable carbon price mechanism is of great significance to give full play to the role of the carbon market in energy saving and emission reduction. It is useful to set up a mechanism wherein the carbon prices are determined by the market and regulated by government. It is necessary to form a reasonable carbon price to reflect the scarcity of carbon permits and form effective incentives for companies. A carbon price that is too low cannot form a compelling incentive for companies, while a carbon price that is too high will increase the cost of companies.

Second, the government should improve the degree of market perfection and reduce market transaction costs. Perfecting the market rules of ETSs, including the carbon discharge permit system and monitoring system, is critical for improving their efficiency. It is also necessary for the government to set up and improve ETSs implementing policy and system development. The government should improve the information quality of carbon trading, which in turn will provide accurate supply and demand information and lower the costs of collecting information.

Third, regulators may consider the adverse impact of carbon disclosure on stakeholders and devise a carbon disclosure policy to encourage companies to disclose carbon emissions voluntarily. The government should strengthen and optimize the corporate social responsibility disclosure systems or utilize external institutions, such as media and public attention, to magnify the potential value losses of companies' socially irresponsible behaviors.

Fourth, the government should further improve policies and regulations that encourage investors and companies to participate in cleaner and low-carbon innovative activities. The government is committed to establishing an incentive mechanism and strengthening the support of innovative capital, market systems, talents, and other elements to promote sustainable economic development effectively.

Finally, we propose that the Chinese government further improve carbon trading regulations and incorporate carbon finance into the carbon trading policy system. The role of tools such as carbon forwards and carbon futures should be further used to assist the carbon market in generating timely, true, and effective carbon price signals.

**Author Contributions:** Conceptualization, M.T.; methodology, W.M. and S.C.; software, S.C. and W.G.; validation, S.C.; formal analysis, S.C., W.M. and W.G.; investigation, S.C.; resources, M.T.; data curation, S.C.; writing—original draft preparation, M.T.; writing—review and editing, M.T.; visualization, W.M.; supervision, F.H.; project administration, F.H.; funding acquisition, M.T. All authors have read and agreed to the published version of the manuscript.

**Funding:** This research was funded by the Major Project of the Chinese National Social Science Fund "Research on improving the development mechanism of urban-rural integration" (21AZD036), the General Project of the Chinese National Social Science Fund "Land development right transaction, land resource allocation mechanism and high-quality economic development" (21FJYB052), and the National Natural Science Foundation of China (72073045).

**Institutional Review Board Statement:** Not applicable.

**Informed Consent Statement:** Not applicable.

**Data Availability Statement:** The data presented in this study are available on request from the corresponding author.

**Conflicts of Interest:** The authors declare no conflict of interest in this article.

#### **References**


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