From High Energy Use to Sustainability: Mechanisms of Carbon Emissions Trading System in Driving Green Transformation of Energy-Intensive Firms

Energy-intensive firms are key participants in China’s carbon emissions trading system (CETS). However, evidence on whether CETS promotes the green transformation (GT) of these firms remains limited. In this study, a multi-period difference-in-differences (DID) model is applied to investigate the impacts of CETS on the GT of 529 listed firms from six energy-intensive industries over the period 2007–2024. Results show that CETS significantly promotes GT, and the findings remain robust after parallel trend, placebo, propensity score matching (PSM)-DID, Goodman-Bacon decomposition, and alternative variable tests. Further analysis reveals that internal control and green technological innovation (Ginn) positively moderate the effects of CETS on the GT of energy-intensive firms. Heterogeneity analysis reveals that the promoting effect is more pronounced in highly competitive industries and among firms with stronger green reputations. These findings provide empirical evidence on the effectiveness of CETS in facilitating the GT of energy-intensive firms.