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The green incentive of the environmental law: The moderating role of climate policy uncertainty

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  • Ding, Yaqian
  • He, Kaili

Abstract

Against the backdrop of resource depletion and escalating environmental pollution, China introduced the new Environmental Protection Law in 2015, which is considered the most stringent of its kind. This study examines the causal impact of the EPL on corporate sustainability, using data from A-share listed companies in Shanghai and Shenzhen. A difference-in-differences model is employed to assess the law’s effects on corporate sustainable development capabilities. The findings show that the EPL significantly enhances firms' sustainability, primarily through two mechanisms: promoting green innovation and strengthening senior management’s environmental awareness. The law’s impact is more pronounced in regions with stronger environmental regulation, but climate policy uncertainty weakens its effectiveness. The study also finds that the law's effects are more noticeable in low-tech industries, non-state-owned enterprises, and in central and western regions. This research not only validates the institutional impact of environmental protection laws but also introduces climate policy uncertainty as a moderating factor, providing valuable empirical insights and policy recommendations for improving environmental regulations and coordinating climate policies.

Suggested Citation

  • Ding, Yaqian & He, Kaili, 2026. "The green incentive of the environmental law: The moderating role of climate policy uncertainty," Economic Analysis and Policy, Elsevier, vol. 91(C), pages 407-422.
    • Handle: RePEc:eee:ecanpo:v:91:y:2026:i:c:p:407-422
    DOI: 10.1016/j.eap.2026.03.024
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