Environmental Regulation And Green Transition

Environmental regulation is an important means of pollution control,and also an effective measure to promote green transition.As we know,green innovation and industrial structure upgrading are two great channels for environmental regulation to achieve the twin goals of economic development and environmental protection.Therefore,this paper mainly studies the impact of environmental regulation on green innovation and industrial change based on two questions:Is economic development level important?Is the implementation of the environmental regulation policy effective?Firstly,this paper analyzes the heterogeneous effects of environmental regulation under different levels of economic development at the macro level through the partially linear functional-coefficient panel model.The specific empirical results show that,environmental regulation will restrain the development of green innovation when the economic development levels are low.As the economy develops,the negative impacts tend to be negligible.And when the economic development levels become advanced,environmental regulation will significantly promote green innovation.Besides,the impacts of environmental regulation on the industrial structure upgrading will also gradually be enhanced with the growth of economic levels.Secondly,this paper evaluates the impact of the Air Pollution Prevention and Control Action Plan(hereafter,APPCAP)on the green innovation quantity,quality,and diversity of listed companies in the polluting industries by adopting the difference-indifference(DID)identification technique.The empirical results show that stricter emission reduction targets will induce listed companies to increase the applications of green inventions.Mechanism analyses further prove that R&D funding is essential to promote green innovation.Specifically,the reduction of dependence on external financing as well as the support of government subsidies would raise the enthusiasm of listed companies to invent.Therefore,this part also verifies the importance of economic levels in helping the environmental regulation to stimulate green innovation at the micro level.Besides,state-owned companies and non-innovators are found to be sensitive to the government’s decisions.Furthermore,this paper also finds that APPCAP will enhance the green innovation diversity,but does not improve the green innovation quality.Thirdly,this paper evaluates the impact of APPCAP on the adjustment of industrial structure and the transfer of polluting industries by adopting the difference-indifference-in-differences identification technique.The empirical results show that APPCAP can lead to a significant reduction in investment in more polluting industries,which means that this policy helps to curb the expansion of polluting industries.Specifically,the investment from the city itself will be significantly affected.The further analysis explains that the polluting industries in cities with stricter environmental regulation will be transferred to cities with weaker environmental regulation.And the above negative impacts will offset the positive effects brought by environmental regulation,which leads to insignificant effects on investment from other cities.In addition,this part also verifies the important role of economic levels in helping the environmental regulation to adjust the polluting industry structure at the micro level.