Sequencing China's ETS expansion and corporate downside risk: What industrial green transformation signals during the adjustment phase.

Unofficial AI-generated summary based on the public title and abstract. Not an official translation.

🔬研究者:Researchers gain insights into the causal effects of ETS expansion sequencing on firm risk and the role of disclosure attributes.

🏢実務担当者:Corporate sustainability teams in hard-to-abate sectors can use these findings to anticipate downside risk during MRV phases and adjust compliance strategies.

🏛政策担当者:Policymakers should consider the risk implications of policy sequencing and the need for credible disclosure mechanisms when scaling up carbon pricing.

Industrial decarbonization increasingly relies on emissions trading systems (ETS) that expand into hard-to-abate sectors. Yet the adjustment phase can generate material downside risk that affects firms' ability to finance compliance, sustain investment, and deliver credible transition outcomes-issues central to environmental management and policy design. This study exploits China's national ETS expansion to steel, cement, and aluminum as a quasi-natural experiment and explicitly separates two policy moments: an early control-year onset (MRV start, 2024Q1) and a later public information shock (2025Q2). Using a dynamic difference-in-differences/event-study framework with firm and quarter fixed effects and two-way clustered standard errors, we track quarterly tail risk, default risk, and crash risk for listed firms around both windows. We operationalize industrial green transformation with two complementary measures: an outcome-anchored composite (IGT-A) and a text-based disclosure indicator that distinguishes Action versus Risk narratives and Transition versus Physical themes (IGT-B). The control-year onset window shows strong anticipation and persistent increases in downside risk, whereas the public information shock window produces an immediate spike followed by partial reversal. Across specifications, IGT-A is not robustly linked to short-horizon risk dynamics; by contrast, the Action component of IGT-B is positively associated with downside risk, consistent with intensified compliance communication under regulatory pressure. Mechanism evidence is mixed in the short sample: financing and innovation channels are weak, and disclosure-governance proxies should be interpreted cautiously. The findings highlight how policy sequencing, measurement, reporting, and verification (MRV) salience, and disclosure credibility jointly shape risk during ETS scale-up.

• semanticscholar https://doi.org/10.1016/j.jenvman.2026.129146first seen 2026-05-15 21:05:58