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The impact of environmental regulations and government subsidies and their policy mix on clean technology innovation

Author

Listed:
  • Xiang Cai

    (Guilin University of Electronic Technology)

  • Wang Dan

    (Guilin University of Electronic Technology)

  • Dongming Ge

    (Guilin University of Electronic Technology)

  • Xiaohui Zhao

    (Guilin University of Electronic Technology)

  • Yihui Wang

    (Guilin University of Electronic Technology)

Abstract

Existing frontier studies have predominantly focused on the incentivizing role of a single policy instrument, such as environmental regulations or government subsidies, in driving clean technology innovation. However, they have generally neglected to consider the impact of policy mix instruments on fostering clean technology innovation. This paper presents a mathematical deduction of the impact of environmental regulations, government subsidies, and their combined policy mix on clean technology innovation. Additionally, an empirical study is conducted using panel data from listed enterprises in China's clean energy industry spanning the period from 2008 to 2021. The findings reveal an inverted U-shaped relationship between both environmental regulations and government subsidies and the incentives for clean technology innovation, that is, they are characterized by promotion followed by suppression. Further analysis shows that a combination of environmental regulations and government subsidies positively promotes clean technology innovation. The results of the heterogeneity analysis indicate that environmental regulations and government subsidies have higher clean technology innovation performance for SOEs (state-owned enterprises), and the incentive effects of their policy mix are more significant. Moreover, in the eastern region, equal levels of government subsidies or environmental regulations yield higher incentives compared to the central and western regions, and the incentive effects of their policy mixes are more significant too. The findings of this paper will help policymakers flexibly design and implement incentive policies for clean technology innovation.

Suggested Citation

  • Xiang Cai & Wang Dan & Dongming Ge & Xiaohui Zhao & Yihui Wang, 2025. "The impact of environmental regulations and government subsidies and their policy mix on clean technology innovation," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(1), pages 1987-2023, January.
    • Handle: RePEc:spr:endesu:v:27:y:2025:i:1:d:10.1007_s10668-023-03953-z
    DOI: 10.1007/s10668-023-03953-z
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