Can Green Policy Enhance Corporate Environmental Performance? Evidence from China’s New Energy Demonstration City Policy

Ruotong Liu, Yike Wang and Chengkun Liu ()
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Ruotong Liu: The Institute for Sustainable Development, Macau University of Science and Technology, Macao 999078, China
Yike Wang: School of Business, Macau University of Science and Technology, Macao 999078, China
Chengkun Liu: The Institute for Sustainable Development, Macau University of Science and Technology, Macao 999078, China

Energies, 2025, vol. 18, issue 19, 1-27

Abstract: Global efforts to achieve carbon neutrality increasingly rely on institutional green policy that reshape corporate environmental behavior. This study examines whether green policy improves corporate environmental performance (EP). Using panel data of the A-share listed firms from 2010 to 2022, we exploit the rollout of pilot cities as a quasi-natural experiment and apply a difference-in-differences (DID) framework, supplemented by double machine learning (DML) and robustness tests. The results show that the New Energy Demonstration City (NEDC) policy notably increases EP, with stronger effects for state-owned enterprises, large firms, and regulated industries. Mechanism analysis indicates that artificial intelligence innovation capacity and the stringency of regional environmental regulation amplify the policy’s effectiveness, revealing a “innovation–regulation” dual mechanism. By focusing on integrated EP rather than single outcomes, this paper extends the literature on green policy instruments. It demonstrates that structural policies combining fiscal incentives and regulatory constraints can correct market failures and foster long-term green transition. Beyond China, the findings provide insights for other developing economies where market-based instruments alone may be insufficient to trigger low-carbon transformation.

Keywords: New Energy Demonstration City (NEDC) policy; corporate environmental performance; difference-in-differences; double machine learning; green transition (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2025
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