The Environmental Protection Tax and Corporate Green Innovation: Evidence from China

Qiuyue Yin (), Bingquan Yang, Chenyu Meng, Wanting Xu and Zhiyi Liu ()
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Qiuyue Yin: School of Economics and Management, Beijing University of Chemical Technology, Beijing 100029, China
Bingquan Yang: Jon M. Huntsman School of Business, Utah State University, Logan, UT 84322, USA
Chenyu Meng: Business School, Beijing Normal University, Beijing 100875, China
Wanting Xu: Faculty of Architecture, The University of Hong Kong, Hong Kong SAR, China
Zhiyi Liu: School of Government, Beijing Normal University, Beijing 100875, China

Sustainability, 2025, vol. 17, issue 21, 1-21

Abstract: The environmental protection tax (EPT) is a vital means for China to promote sustainable development. However, its impact on corporate green innovation is controversial. Utilizing the data from Chinese A-share industrial listed companies from 2013 to 2022 and the difference-in-differences (DID) model, this study examines the impact of the EPT on corporate green innovation. The results indicate that the EPT can promote corporate green innovation, which is robust across various tests. Furthermore, the EPT fosters corporate green innovation mainly by stimulating companies to increase research and development (R&D) investment. The heterogeneity analysis demonstrates that the EPT promotes green innovation only in large-scale companies, non-state-owned companies, and eastern companies. The further analysis suggests that the green innovation brought by the EPT could improve corporate economic performance. Moreover, the EPT promotes both corporate substantive innovation and strategic innovation. That is, the EPT could enhance the quality of green innovation whilst also inducing strategic behavior. This study could provide profound insights to facilitate green transitions in emerging market countries like China.

Keywords: environmental protection tax; corporate green innovation; DID model; substantive innovation; strategic innovation (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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