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Environmental protection tax and enterprises’ green technology innovation: Evidence from China

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  • Wang, Xiaoyan
  • Wang, Shimeng
  • Wu, Keying
  • Zhai, Chenzhe
  • Li, Yongle

Abstract

The Environmental Protection Tax Law was officially implemented, marking the initial establishment of China's green tax system. This paper aims to estimate whether the introduction of environmental protection tax will promote enterprises' green technology innovation. Based on data from listed enterprises from 2015 to 2021, this paper takes the implementation of environmental protection tax in 2018 as a quasi-natural experiment, and uses the DID method to evaluate the impact of the implementation of environmental protection tax on the technological innovation ability of enterprises. The results show that, after the implementation of environmental protection tax, the quantity of green patents increased significantly, while the quality of green patents decreased significantly. The analysis of mechanism channel reveals that environmental protection tax policy appears to increase the number of green patents putting regulatory pressure on enterprises and increasing R&D investment, while managerial myopia inhibits the improvement of green patent quality. The changes in the quantity and quality of green patents in large enterprises are more significant. It is also found that the quantity in coastal areas decreased significantly, while the quantity in inland areas markedly increased.

Suggested Citation

  • Wang, Xiaoyan & Wang, Shimeng & Wu, Keying & Zhai, Chenzhe & Li, Yongle, 2024. "Environmental protection tax and enterprises’ green technology innovation: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 96(PA).
    • Handle: RePEc:eee:reveco:v:96:y:2024:i:pa:s1059056024006099
    DOI: 10.1016/j.iref.2024.103617
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    Cited by:

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    2. Wang, Shanshan & Wang, Shugang & Cheng, Yiqian, 2025. "How do heterogeneous green financial policy tools affect pollution emission reduction of enterprises?," Finance Research Letters, Elsevier, vol. 77(C).
    3. Zhiyong Han & Qi Li & Bo Li, 2025. "Responsibility Driving Innovation: How Environmentally Responsible Leadership Shapes Employee Green Creativity," Sustainability, MDPI, vol. 17(10), pages 1-18, May.
    4. Pan, Xiaozhen & Zhang, Nianming, 2025. "The impact of environmental tax on R&D investment of heavily polluting companies: Incentive or inhibition?," International Review of Economics & Finance, Elsevier, vol. 97(C).
    5. Yin, Hong & Zhang, Lu & Cai, Chuangneng & Zhang, Zenglian & Zhu, Qihong, 2025. "Fiscal & tax incentives, ESG responsibility fulfillments, and corporate green innovation performance," International Review of Economics & Finance, Elsevier, vol. 98(C).

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    Keywords

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    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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