IDEAS home Printed from https://ideas.repec.org/a/eee/ecanpo/v85y2025icp1645-1662.html
   My bibliography  Save this article

Green manufacturing pioneers: Unveiling the carbon dioxide reduction effect of China's green factories

Author

Listed:
  • Hu, Shengming
  • Cao, Lanlan
  • Shi, Yanli
  • Wang, Hui

Abstract

Unlike existing studies that primarily center on mandatory environmental policies, this study investigates the environmental impact of green manufacturing (GM) within the framework of voluntary policies, emphasizing its dual role in both incentivizing and constraining firms. This study leverages the Green Factory Policy and employs a staggered difference-in-differences model to analyze GM's impact on corporate CO₂ emissions and its underlying mechanisms. Results show that GM reduces CO2 emissions per unit of revenue and per capita by 10.07% and 8.84%, respectively. Mechanism analysis reveals that GM reduces CO₂ emissions through green innovation, energy optimization, and enhanced energy efficiency. Heterogeneity analysis further reveals that the CO2 reduction effect is significant only for firms with high financing constraints, high human capital, and large scale. Additionally, standardized evaluation criteria and dynamic regulatory oversight are shown to strengthen GM's impact. Moreover, GM generates forward spillover effects, significantly reducing downstream customers’ CO2 emissions. This research advances the understanding of production innovation and environmental protection, offering practical insights for improving the GM system and advancing sustainable development.

Suggested Citation

  • Hu, Shengming & Cao, Lanlan & Shi, Yanli & Wang, Hui, 2025. "Green manufacturing pioneers: Unveiling the carbon dioxide reduction effect of China's green factories," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 1645-1662.
    • Handle: RePEc:eee:ecanpo:v:85:y:2025:i:c:p:1645-1662
    DOI: 10.1016/j.eap.2025.02.016
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0313592625000451
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eap.2025.02.016?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hu, Shengming & Zhang, Yunyun & Hu, Yao & Wang, Hui, 2024. "Born by water: Does water resource reallocation promote entrepreneurship?," China Economic Review, Elsevier, vol. 87(C).
    2. Christos Constantatos & Markus Herrmann, 2011. "Market Inertia and the Introduction of Green Products: Can Strategic Effects Justify the Porter Hypothesis?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 50(2), pages 267-284, October.
    3. Lv, Chengchao & Shao, Changhua & Lee, Chien-Chiang, 2021. "Green technology innovation and financial development: Do environmental regulation and innovation output matter?," Energy Economics, Elsevier, vol. 98(C).
    4. Hui Wang & Lili Jiang & Hongjun Duan & Yifeng Wang & Yichen Jiang & Xiaoken Lin & Sundarapandian Vaidyanathan, 2021. "The Impact of Green Finance Development on China’s Energy Structure Optimization," Discrete Dynamics in Nature and Society, Hindawi, vol. 2021, pages 1-12, December.
    5. Cui, Jingbo & Dai, Jing & Wang, Zhenxuan & Zhao, Xiande, 2022. "Does Environmental Regulation Induce Green Innovation? A Panel Study of Chinese Listed Firms," Technological Forecasting and Social Change, Elsevier, vol. 176(C).
    6. Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and Taxation: Theory and Evidence," American Economic Review, American Economic Association, vol. 99(4), pages 1145-1177, September.
    7. Stiglitz, Joseph E., 2015. "Leaders and followers: Perspectives on the Nordic model and the economics of innovation," Journal of Public Economics, Elsevier, vol. 127(C), pages 3-16.
    8. Wei, Xiahai & Jiang, Feng & Su, Yaqin, 2024. "More green, less labor gains? Green factory and labor income share in China," Energy Economics, Elsevier, vol. 133(C).
    9. Thorsten Beck & Ross Levine & Alexey Levkov, 2010. "Big Bad Banks? The Winners and Losers from Bank Deregulation in the United States," Journal of Finance, American Finance Association, vol. 65(5), pages 1637-1667, October.
    10. Sun, Liyang & Abraham, Sarah, 2021. "Estimating dynamic treatment effects in event studies with heterogeneous treatment effects," Journal of Econometrics, Elsevier, vol. 225(2), pages 175-199.
    11. Wang, Zongrun & Fu, Haiqin & Ren, Xiaohang & Gozgor, Giray, 2024. "Exploring the carbon emission reduction effects of corporate climate risk disclosure: Empirical evidence based on Chinese A-share listed enterprises," International Review of Financial Analysis, Elsevier, vol. 92(C).
    12. Lin, Boqiang & Ma, Ruiyang, 2022. "Green technology innovations, urban innovation environment and CO2 emission reduction in China: Fresh evidence from a partially linear functional-coefficient panel model," Technological Forecasting and Social Change, Elsevier, vol. 176(C).
    13. Goodman-Bacon, Andrew, 2021. "Difference-in-differences with variation in treatment timing," Journal of Econometrics, Elsevier, vol. 225(2), pages 254-277.
    14. Syed Abdul Rehman Khan & Zhang Yu & Muhammad Umar & Muhammad Tanveer, 2022. "Green capabilities and green purchasing practices: A strategy striving towards sustainable operations," Business Strategy and the Environment, Wiley Blackwell, vol. 31(4), pages 1719-1729, May.
    15. Lee, Chien-Chiang & Wang, Chang-song & He, Zhiwen & Xing, Wen-wu & Wang, Keying, 2023. "How does green finance affect energy efficiency? The role of green technology innovation and energy structure," Renewable Energy, Elsevier, vol. 219(P1).
    16. Böhringer, Christoph & Moslener, Ulf & Oberndorfer, Ulrich & Ziegler, Andreas, 2012. "Clean and productive? Empirical evidence from the German manufacturing industry," Research Policy, Elsevier, vol. 41(2), pages 442-451.
    17. Li, Rui & Fang, Debin & Xu, Jiajun, 2024. "Does China's carbon inclusion policy promote household carbon emissions reduction? Theoretical mechanisms and empirical evidence," Energy Economics, Elsevier, vol. 132(C).
    18. Weifen Lin & Jun Sun & Bei Liu & Hui Wang, 2024. "Does the availability of credit resources reduce corporate pollution emissions? Evidence from the geographic network of banks in China," Applied Economics, Taylor & Francis Journals, vol. 56(42), pages 5035-5049, September.
    19. Suhong Li & Thomas Ngniatedema & Fang Chen, 2017. "Understanding the Impact of Green Initiatives and Green Performance on Financial Performance in the US," Business Strategy and the Environment, Wiley Blackwell, vol. 26(6), pages 776-790, September.
    20. Xiujie Tan & Si Cheng & Yishuang Liu, 2024. "Green digital finance and technology diffusion," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-11, December.
    21. Xu, Le & Fan, Meiting & Yang, Lili & Shao, Shuai, 2021. "Heterogeneous green innovations and carbon emission performance: Evidence at China's city level," Energy Economics, Elsevier, vol. 99(C).
    22. Liu, Ying & Huang, Hongyun & Mbanyele, William & Wei, Zhixing & Li, Xin, 2025. "How does green industrial policy affect corporate green innovation? Evidence from the green factory identification in China," Energy Economics, Elsevier, vol. 141(C).
    23. Shang, Yuping & Raza, Syed Ali & Huo, Zhe & Shahzad, Umer & Zhao, Xin, 2023. "Does enterprise digital transformation contribute to the carbon emission reduction? Micro-level evidence from China," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 1-13.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xu Zhang & Xing Bao, 2025. "Sustainable Transformation: The Impact of Climate Risk Perception on Corporate Operational Resilience in China," Sustainability, MDPI, vol. 17(8), pages 1-19, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yu, Lianchao & Liu, Donghui & Liu, Qiang & Han, Hongling, 2025. "De-localization of environmental governance and corporate innovation structure: Evidence from a quasi-natural experiment in China," Research in International Business and Finance, Elsevier, vol. 73(PA).
    2. Liu, Ying & Huang, Hongyun & Mbanyele, William & Wei, Zhixing & Li, Xin, 2025. "How does green industrial policy affect corporate green innovation? Evidence from the green factory identification in China," Energy Economics, Elsevier, vol. 141(C).
    3. Feng, Yuan & Chen, Zhi & Nie, Changfei, 2023. "The effect of broadband infrastructure construction on urban green innovation: Evidence from a quasi-natural experiment in China," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 581-598.
    4. Cheng, Zhen & Ding, Chante Jian & Zhao, Kunqian, 2025. "Energy use rights trading and carbon emissions," Energy, Elsevier, vol. 315(C).
    5. Lee, Chien-Chiang & Qin, Shuai & Li, Yaya, 2022. "Does industrial robot application promote green technology innovation in the manufacturing industry?," Technological Forecasting and Social Change, Elsevier, vol. 183(C).
    6. Zhou, Bihua & Huang, Yun & Zhao, Yihang, 2024. "Research on the incentive effect of the policy combination of carbon-reduction pilot cities," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 456-475.
    7. Zhu, Lin & Sheng, Yu & Liao, Hua & Blaschke, Maximilian J., 2025. "Enhancing clean cooking energy transition through living facility improvements: Experience from China," Energy Economics, Elsevier, vol. 144(C).
    8. Zhong, Shen & Zhou, Zhicheng & Gao, Wei, 2025. "Impact of regional finance reform and innovation policies on green innovation in pilot cities: A quasi-natural experiment," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 888-911.
    9. Ma, Rui & Guo, Fei & Li, Dongdong, 2024. "Can public data availability affect stock price crash risk? Evidence from China," International Review of Financial Analysis, Elsevier, vol. 94(C).
    10. Brick, Kerri & De Martino, Samantha & Visser, Martine, 2023. "Behavioural nudges for water conservation in unequal settings: Experimental evidence from Cape Town," Journal of Environmental Economics and Management, Elsevier, vol. 121(C).
    11. Hu, Shengming & Zhang, Yunyun & Hu, Yao & Wang, Hui, 2024. "Born by water: Does water resource reallocation promote entrepreneurship?," China Economic Review, Elsevier, vol. 87(C).
    12. Ye, Yongwei & Kong, Dongmin & Li, Renzhi & Li, Xiaofan & Tao, Yunqing, 2024. "Online judicial auction, loan availability, and corporate investment in China," The British Accounting Review, Elsevier, vol. 56(6).
    13. Wang, Ruqi & Xu, Pei & Gao, Honggui, 2024. "Rectifying local governments’ strategic environmental enforcement: Can refined air pollution monitoring enhance local air quality in China?," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 978-995.
    14. Zeng, Shihong & Li, Tengfei & Wu, Shaomin & Gao, Weijun & Li, Gen, 2024. "Does green technology progress have a significant impact on carbon dioxide emissions?," Energy Economics, Elsevier, vol. 133(C).
    15. Nie, Song, 2024. "Does intellectual property rights protection matter for low-carbon transition? The role of institutional incentives," Economic Modelling, Elsevier, vol. 140(C).
    16. Dai, Yanke & Du, Ting & Gao, Huasheng & Gu, Yan & Wang, Yongqin, 2024. "Patent pledgeability, trade secrecy, and corporate patenting," Journal of Corporate Finance, Elsevier, vol. 85(C).
    17. He, Weimin & Wang, Bin, 2024. "Environmental jurisdiction and energy efficiency: Evidence from China's establishment of environmental courts," Energy Economics, Elsevier, vol. 131(C).
    18. Li, Yuting & Huang, Jianye, 2025. "The accountability system for operation and investment and M&A performance of state-owned enterprises in China," Pacific-Basin Finance Journal, Elsevier, vol. 89(C).
    19. Carlos F. Avenancio-León & Alessio Piccolo & Leslie Sheng Shen, 2024. "Self-reinforcing Glass Ceilings," Working Papers 24-14, Federal Reserve Bank of Boston.
    20. Chen, Hongwen & Cheng, Ken & Zhang, Meiyang, 2023. "Does geographic proximity affect firms’ cross-regional development? Evidence from high-speed rail construction in China," Economic Modelling, Elsevier, vol. 126(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecanpo:v:85:y:2025:i:c:p:1645-1662. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/economic-analysis-and-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.