Assessing the impact of climate policy stringency on corporate energy innovation: Insights from China

Corporate energy innovation is a crucial means for countries worldwide to achieve sustainable development goals. Climate policy is one of the measures employed by government departments to address climate change and energy challenges. Existing research mostly focuses on the regional environmental consequences of climate policy, lacking consideration of the policy stringency, and there is a gap in understanding its sustainable energy benefits at the micro level. This study uses data from Chinese A-share listed enterprises from 2012 to 2022, combined with media text big data, to construct and measure a firm-level climate policy stringency indicator using machine learning methods. We explore the complex interplay between climate policy stringency and corporate energy innovation based on institutional theory and its legitimacy perspective. Empirical analysis results indicate that: 1) Climate policy stringency can incentivize companies to pursue energy innovation. 2) Climate policy stringency can promote the process of corporate energy innovation by helping companies acquire external economic resources and encouraging them to modify their internal sustainable development philosophy. 3) In state-owned enterprises, non-short-termism management enterprises, enterprises receiving higher government environmental subsidies, enterprises with higher media attention, enterprises belonging to regulated and polluting industries, and those in regions with high public environmental attention, the climate policy stringency is more likely to have positive effects on energy innovation. This study will help government practitioners and corporate managers comprehend the interplay between the climate policy stringency and corporate energy innovation. It also provides targeted management insights to advance green innovation transformation in the economy and society.