Is some uncertainty better than none? Nonlinear relationships between climate policy uncertainty and corporate green performance

Unclear and shifting climate policy can discourage firms from investing in greener operations, yet some unpredictability may instead push them toward innovation; where the turning point lies, and how the institutional environment reshapes it, is still debated. Leveraging a decade-long panel of Chinese A-share firms, this study links climate-policy uncertainty (CPU) extracted from provincial news sentiment to corporate green performance captured by green total factor productivity (GTFP). Fixed-effects estimations reveal a distinct inverted-U pattern: moderate CPU aligns with higher GTFP, whereas greater volatility reverses the gain. Causal robustness is verified through an instrumental-variable strategy that exploits U.S. CPU shocks and a propensity-score-matched subsample. Two oversight moderators: government environmental attention (GOV) and public environmental attention (PUB), broaden the zone in which uncertainty is beneficial and ease the decline beyond it, underscoring the stabilising roles of accountable bureaucratic routines and societal scrutiny. Heterogeneity analysis shows that non-state and low-pollution firms follow the benchmark concave curve, while state-owned and heavy-polluting enterprises exhibit a U-shape, recovering only when strengthened oversight and fiscal support accompany rising CPU; firm size has little independent effect once governance mandate and pollution exposure are considered. These findings refine real-options and Porter perspectives by demonstrating that the payoff to “waiting” hinges on credible policy signals reinforced by multilayer governance, suggesting that policymakers can transform uncertainty from a barrier into a catalyst for sustained corporate green performance by cultivating consistent administrative guidance and an engaged public sphere.