Low-Carbon Transition and Green Innovation: Evidence from Pilot Cities in China

Abstract

Officially launched in 2008, China’s low-carbon city pilot project is aimed at creating green and low-carbon cities by restricting individual consumption and enterprise production behaviors as a means of controlling greenhouse gas emissions. Among other indicators, the impact of the pilot low-carbon initiative may be evaluated based on whether it induces enterprises to engage in green technology innovation. Using green patent application data from Chinese listed companies between 2009 and 2018, this paper applies a time-varying difference-in-difference (DID) model to conduct a multi-dimensional empirical test on the changes in listed companies’ degrees of green innovation before and after the publication of the list of three batches of pilot cities. Our findings were as follows: first, as a means of environmental regulation, the pilot low-carbon city initiative’s effect on enterprises’ green technology innovation conforms to the Porter hypothesis—that is, it encourages enterprises to improve their production technology and enhances the green innovation levels of listed companies in pilot cities; second, in terms of regional differences, the low-carbon cities pilot initiative can significantly induce green innovation activities among enterprises in China’s eastern region, but not in the central or western regions; third, from the perspective of enterprise ownership, the initiative promotes greater awareness of green innovation among non-state-owned enterprises than among state-owned enterprises. At the enterprise level, this paper provides theoretical support and empirical evidence for the success of the low-carbon city pilot initiative and highlights the implications for nationwide policy.