Impact of Environmental Regulation on Regional Innovation in China from the Perspective of Heterogeneous Regulatory Tools and Pollution Reduction

Haoyang Lu () and Alistair Hunt
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Haoyang Lu: Department of Economics, University of Bath, Bath BA2 7AY, UK
Alistair Hunt: Department of Economics, University of Bath, Bath BA2 7AY, UK

Sustainability, 2025, vol. 17, issue 5, 1-23

Abstract: The relationship between environmental regulation and regional innovation has been disputed. This paper analyzes data at the provincial level in China between 2009 and 2020 using a fixed-effects model to investigate the relationship between environmental regulation and innovation. The baseline regression results suggest that market-based environmental regulatory instruments effectively promote regional innovation, while command-and-control environmental regulatory instruments hinder regional innovation. However, the impact of environmental regulation exhibits heterogeneity and non-linearity. The implementation of overly strict command-and-control environmental regulatory instruments hinders innovation, while the implementation of low-intensity command-and-control environmental regulatory instruments instead promotes innovation. In economically developed provinces, market-based environmental regulation promotes innovation, while in less economically developed provinces, market-based environmental regulation inhibits innovation instead. Further analysis from a pollution reduction perspective shows that environmental regulations that mitigate air pollution significantly promote regional innovation levels. This study not only enriches theoretical discourse but also offers practical policy recommendations for balancing environmental governance and innovation development in China.

Keywords: environmental regulation; innovation; command and control environmental regulation; market based environmental regulation; air pollution (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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