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The effect of the policy mix of green credit and government subsidy on environmental innovation

Yechi Ma, Yezhou Sha, Zilong Wang and Wenjing Zhang

Energy Economics, 2023, vol. 118, issue C

Abstract: We examine to what extent ‘policy mix’ of green credit policy and government subsidy affects high-quality environmental innovation of high-polluting firms. The green credit policy is a special environmental regulation that guides the distribution of credit from banks. Using the difference-in-difference method, we find that Green Credit Guidelines (GCGs) have a negative impact on the high-quality environmental innovation of high-polluting firms in China. However, the negative relationship between GCGs and high-quality environmental innovation depends on the level of government subsidy. Subsidies can effectively correct the negative impact of GCGs. The mechanism analysis shows that GCGs hinder high-quality environmental innovation through two channels: (1) increase in compliance costs and (2) lack of long-term bank credit that supports environmental innovation. Government subsidies can play a moderating role in the second channel.

Keywords: Green credit; Government subsidy; High-quality environmental innovation; Compliance cost; Credit allocation (search for similar items in EconPapers)
JEL-codes: D22 G21 G28 H23 Q55 Q58 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:118:y:2023:i:c:s0140988323000105

DOI: 10.1016/j.eneco.2023.106512

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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