Environmental Regulation And Technological Change:Induced Innovation Hypothesis And Its Empirical Test

Environmental issues can affect the sustainable development of humanbeings. The basic way to solve environmental problems lies in the environmentaltechnology innovation and diffusion.There is a match and coordination effect between environmental technologyabsorption incentives and policy tool choice. Technology absorption incentives effectof the emissions trading price tool is the strongest, and its implementation cost isrelatively smallest. Although the policy effect of pollution tax and emission reductionsubsidy doesn’t depend on the contract compliance and monitoring efforts, it isdifficult to avoid the adverse selection behavior of corporate tax evasion anddefrauding the allowance, which resulting in net social welfare losses. The incentiveeffect of emission standards depends on not only the environmental regulator’smonitoring efforts but also the different emission level.Mechanism playing a role in environmental regulation that affects the technologyabsorption of enterprise is closely associated with a country’s market developmentdegree and corporate characteristics. This paper documents that the impact ofenvironmental regulation on enterprise technology absorption generally showsinverted U-shaped path by mathematical model analysis. Empirical tests using theregional panel data model show that China’s stringent environmental regulationshaven’t had a very significant incentive effect on enterprise technology absorption,which still have larger upgrading room. Enterprises’ property rights, industry andregional characteristics play heterogeneity path effects on environment regulationsfunction mechanism in action. Specific policy recommendations have been madebased on the main empirical conclusions.Environmental technology innovation and diffusion have spillover effects. So, atthe micro-level the government must formulate a reasonable technology strategy ofincentive to enterprise for environmental technology absorption and innovation. Froma macro level the government must strengthen international coordination and exploreeffective mechanisms of environmental technology innovation and diffusion. OpenInnovation can facilitate innovation and international diffusion of environmental technologies. But some aspects, such as environmental effects of technologyinnovation and diffusion, are still needed for further studying.