Can government low-carbon regulation stimulate urban green innovation? Quasi-experimental evidence from China’s low-carbon city pilot policy

Abstract

ABSTRACT Existing studies on the innovation effect of environmental regulation lack causal identification and do not distinguish between the types of innovation. This study regards China’s low-carbon city pilot policy (LCCPP) as a quasi-natural experiment and evaluates the impact of LCCPP on urban green innovation represented by green patents. We found that as a comprehensive government low-carbon regulation, LCCPP has significantly promoted urban green innovation and increased the annual average number of green invention patent applications by approximately 320, green utility model patent applications by approximately 210, and the total number of green patent applications by approximately 530. LCCPP can promote green innovation through capital allocation, structural upgrading, investment promotion, and comprehensive governance effects. Moreover, the impact of LCCPP on green innovation demonstrates heterogeneity. LCCPP has a greater positive effect on green innovation in energy conservation, waste management, and alternative energy and is more effective in stimulating green innovation in large cities, cities in developed eastern regions, and cities rich in educational resources. Our study verifies the existence of the Porter hypothesis in China on a city scale and indicates that, for developing countries, a comprehensive low-carbon regulation that combines mandatory and market-based instruments would be preferable for promoting green innovation.