Green Innovation or Expedient Compliance: Carbon Emission Reduction by Heavily Polluting Enterprises Under Green Finance Reform and Innovation Pilot Zone

Fang Cheng, Shuang Yang () and Yanli Wang
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Fang Cheng: School of Finance, Xuzhou University of Technology, Xuzhou 221018, China
Shuang Yang: School of Economics and Management, China University of Mining and Technology, Xuzhou 221116, China
Yanli Wang: School of Economics and Management, China University of Mining and Technology, Xuzhou 221116, China

Sustainability, 2025, vol. 17, issue 14, 1-24

Abstract: The effective design of green financial policies is crucial for balancing the operational pressures of heavily polluting enterprises with the goal of sustained carbon emission reduction. This study investigates the impact of the Green Finance Reform and Innovation Pilot Zone (GFRIPZ) policy by employing a multi-period difference-in-differences (DID) model based on firm-level panel data from 2012 to 2021, covering A-share listed enterprises in Shanghai and Shenzhen. The results show that GFRIPZs significantly reduced carbon emissions in pilot regions, with heterogeneous effects observed across enterprise types—particularly among large enterprises, state-owned enterprises, and those located in financially developed areas. To uncover the underlying mechanisms, we compare two behavioral responses: green innovation, marked by long-term investment in green technologies, and expedient compliance, involving short-term, strategic compliance behaviors. Our findings indicate that GFRIPZs did not effectively promote green innovation. Instead, it has encouraged a shift from productive capital investment toward un-productive, symbolic actions aimed at fulfilling policy requirements. These responses risk undermining the long-term objective of green transformation and may contribute to a broader shift from real economic activity toward speculative or less productive investments, raising concerns about the quality and sustainability of the low-carbon transition.

Keywords: green finance reform and innovation pilot zone; heavy polluters; reduction in carbon emissions; green technological innovation; strategic investment (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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