Why the Size of an Emissions Charge Doesn't Decide How Firms React

Carbon pricing works by putting a price on greenhouse gas emissions so that companies have a financial incentive to reduce them. But the level of the requirement, on its own, doesn't settle how firms respond. The author's research on Chinese exporters suggests that the stringency of an environmental rule is only part of the story: whether firms have the capacity and the opportunity to adjust matters just as much. In that reading, the same charge can land very differently across an industry — a manageable line item for one company, a crisis for another, even where the environmental target is identical.