This paper examines the reform of the environmental monitoring automation and evaluates its impact on innovation activities of the Chinese economy. Our analysis reveals that, the reform raised the compliance cost of the monitored firms with local political connections via removing their information advantage from the connections, thus significantly induced their R&D investment. This study contributes to the literature of induced innovation and Porter hypothesis by detangling the effect of monitoring in addressing regulatory capture and strengthening environmental regulation.

This study estimated firms’ exposure to border carbon adjustment with semantic analysis on 624,713 Q&A records in earnings conference calls of all the Chinese public companies between 2012 and 2023, employing NLP and machine learning approaches. It further examined how the firms with heterogeneity in industries, scales, and financial performance, were exposed to CBAM risk and responded strategically during the EU CBAM policy agenda.

Employing a meta-regression analysis, this paper analyzes 416 leakage ratio estimates extracted from 39 economic studies published in English and Chinese between 2004 and 2022. The results confirm that both ‘intra-region’ and ‘cross-border’ anti-leakage policies significantly impact carbon policy regions. The findings imply to policymakers that, although the implementation of border carbon adjustments provokes international debate under current WTO regulations, the ‘intra-region’ policies, which are more politically feasible, can achieve comparable effectiveness.