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Carbon Border Adjustment Mechanism as a Catalyst for Greenfield Investment: Evidence from Chinese Listed Firms Using a Difference-in-Differences Model

Year: 2025

Type: article

Abstract: Research on the EU’s Carbon Border Adjustment Mechanism (CBAM) has predominantly examined its implications for climate governance and export trade yet overlooked how enterprises adapt their foreign investment strategies. Using panel data from Chinese listed companies between 2011 and 2022, this study employs the CBAM as a quasi-natural experiment and applies a difference-in-differences (DID) model for analysis. Our findings indicate that the CBAM has a significant positive impact on outward greenfield investments, as robustly validated through a series of rigorous robustness checks. Mechanism analysis reveals two operational channels: trade restructuring effect (reduced export shares) and innovation-driven demand effect (enhanced R&D intensity). Heterogeneity tests further indicate more substantial CBAM responsiveness among eastern coastal firms, non-state-owned enterprises, and those pursuing horizontal production-oriented expansions. This study contributes to the literature on CBAM’s effects and offers practical recommendations for enterprises to mitigate CBAM’s impact via greenfield investments.

Source: Sustainability

DOI: 10.3390/su17083492

Authors: Jiayi Liu, Weidong Wang, Tengfei Jiang, Huirong Ben, Jie Dai

Institution: Jiangsu University

Language: English

Topic: International Business and FDI

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Climate action, Industry, innovation and infrastructure, Decent work and economic growth

Open Access status: gold

Estimated APC paid: $2,896