This study aims to investigate the effects of Emissions Trading Schemes (ETSs) on green innovation, as measured by patent applications for environmentally friendly technologies. By using firm-level data, this study employs a staggered difference-in-differences approach to capture the dynamic and heterogeneous effects of ETS policies across regions.

Our empirical analysis shows that, overall, ETSs do not significantly drive green innovation. However, it is observed in the Tokyo ETS, which appears to foster an increase in green technology patents. One possible explanation is that the Saitama ETS, operating largely under voluntary regulatory measures, may lack the rigorous enforcement necessary to incentivize innovation compared to the more structured Tokyo ETS. Moreover, given the extended time lag between the development and commercialization of new technologies, firms currently subject to ETSs might still be in the early stages of innovation. Therefore, the full impact of these schemes on green innovation could take longer to materialize.

In this financial year, we summarize our findings and finish a manuscript. We will submit it to an international English-language journal before the end of this financial year. Although there is a possibility of rejection, we are prepared to revise and resubmit the work based on feedback. The project is concluded within this fiscal year, despite some delays in the submission process.

Looking ahead, the project could be enriched by a more detailed exploration of the regulatory differences between ETS programs and by incorporating additional robustness checks. These extensions would further clarify the relationship between policy design and the pace of green technological advancement.