Environmental regulation and corporate green innovation: evidence from the implementation of the total energy consumption target in China

Larry Su ()
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Larry Su: Edge Hill University

Journal of Business Economics, 2025, vol. 95, issue 4, No 1, 499-526

Abstract: Abstract Using a continuous difference-in-differences (DID) model, this study examines the influence of environmental regulations on corporate green innovation. By analyzing a panel dataset of Chinese publicly listed companies spanning from 2010 to 2020, this study finds that stricter total energy consumption target (TECT) policies, in line with Porter’s hypothesis, have encouraged companies to increase their development of green inventions. Additionally, the study reveals that the positive relationship between TECT policies and corporate green innovation is strengthened by market competition and institutional development. Furthermore, the study finds that the Porter effect primarily affects firms operating in pollution-intensive industries within regions characterized by high energy consumption. This suggests that the TECT policies have effectively directed regions with high energy consumption to prioritize energy control objectives over economic expansion goals. These results emphasize the importance of formulating environmental policies that are tailored to the specific characteristics of different regions, sectors, and individual firms. By doing so, a more effective and targeted approach to sustainable transformation can be achieved.

Keywords: Environmental regulation; Total energy consumption target; Green innovation; Market competition; Institutional development (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11573-024-01207-6

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