Beyond tax breaks: How do different incentives shape clean energy innovation quality?

Technological innovation in clean energy is pivotal to realizing green and sustainable development. This study examines how three tax incentives (tax rebates, pre-tax deductions, and tax rate preferences) affect technological innovation in clean energy enterprises (TICEE), focusing on policy effects and innovation quality. A partial equilibrium theoretical model reveals distinct mechanisms: Pre-tax deductions exhibit a “U-shaped” then an inverted “U-shaped” effect on corporate innovation, while tax rebates demonstrate an initially uncertain and then inverted “U-shaped” effect, and tax rate preferences have an inverted “U-shaped” effect. Empirically, this study manually collects and classifies data from annual reports of listed clean energy firms (2014–2021) and estimates Poisson models to quantify policy impacts. Results indicate that: First, tax rebates promote the quality of TICEE, and can be further strengthened. Second, the pre-tax deduction promotes both the quantity and quality of TICEE, though with insufficient policy intensity, and the effects on quantity are more pronounced. Third, tax rate preferences inhibit both quantity and quality of TICEE. Heterogeneity analysis indicates that the impacts of three tax incentives on the quantity and quality of TICEE vary across ownership and regions. The findings provide critical insights for optimizing tax incentive designs to stimulate green technology advancement.