Greenlighting or Greenwashing? The Effect of Export Value Added Tax Rebates on Firm Pollution Emissions

Export value‐added tax rebates are a multifaceted policy tool, serving to foster environmentally friendly industries and to support firms' green transformation. This study examined the impact of such rebates on exporting firms' emission behavior. The results show that a 1 percentage point increase in the rebate rate led to a 0.3 to 0.9 percent increase in firms' emissions, driven primarily by expanded production and partially offset by changes in industrial structure, with no significant improvements in firms' emission intensity. Although green investment increased under the policy, it was directed primarily toward expanding conventional facilities rather than advancing green technologies. The policy's positive impact on green investment was strongest for firms facing regulatory pressure but subject to financial constraints, as the increased cash flow from the rebate relaxed their budget constraints. The study highlights the challenges in designing environmental policies that balance environmental protection and economic growth.