Clean Development Mechanism and Knowledge Spillovers: Evidence from Chinese Firm-level Patent Data

Abstract

Under the Kyoto Protocol, Clean Development Mechanism (CDM) is expected to play a role in facilitating the North-South knowledge spillovers for climate-friendly technologies. Using Chinese firm-level patents and citations during the 2000-2015 period, this paper adopts the matched Difference-in-Differences (DID) approach to estimate the causal impact of CDM projects on firms' innovation in renewable energy and energy efficiency technologies. We find evidence that CDM projects contribute to firms' innovation quantity, quality, and direction. These findings are consistent against alternative matching estimators and robustness checks to mitigate confounding environmental and innovation policies. Moreover, CDM projects exhibit heterogeneity, capturing the learning-by-doing effect, the induced-innovation incentives, and the economics of scale. We further explore the knowledge spillovers channel in which CDM facilitates patent citations from sponsoring countries to the host country. By exploiting the variations in firms' exposure to knowledge stock from sponsoring countries, we identify the different roles of foreign sponsors in the knowledge spillovers.

Publication
Under Review
Zhenxuan Wang
Zhenxuan Wang
Ph.D. Candidate

My research interests lie at the intersection of environmental and energy economics, climate policy, and industrial organization.

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