Does green industrial policy promote the sustainable growth of polluting firms? Evidences from China

Abstract

In this research, the impact of municipal green industry policies in 15 cities on the economic and environmental performance of local companies was evaluated, and the policy coordination mechanism was studied. As a dual-goal policy mix, the green industrial policy has been used by Chinese municipal governments to solve the dilemma between the economic growth and environmental mitigation. However, the quantitative evaluation of these green industrial policy trials remains limited. To address this issue, the policy evaluation in this research applied sewage discharge data and operation data of 22,670 Chinese textile firms from 1998 to 2013 from Chinese Environmental Statistics Database. Fixed-effect regression analysis and dynamic difference-in-differences (DID) approach were used to assess the dual-faceted impacts of green industrial policies and their subtypes, as well as the continuity of these impacts. The findings suggest that adopting a dual-objective green industrial policy is an effective approach to encourage heavy-polluting firms to develop in a more balanced and sustainable way. From dynamic DID analysis, these green industrial policies have continuity effects on both chemical oxygen demand discharge intensity and annual revenue of firms after implementation and the general impacts can last for at least 4 years. The study also reveals the heterogeneity in the impacts of three different subtypes of green industrial policy. The technology-push policy subtype can quickly reduce environmental discharge without compromising economic development, while demand-pull policy subtype has a slow effect on the improvement of environmental performance. The balanced policy subtype can promote enterprises to achieve both optimal performance of economy and environment, although the efficiency of balanced policy subtype is between two subtypes. Generally, this research provides reliable basis for the implementation of green industrial policies in developing countries and provides certain inspiration for the enriching of green industry policy theory.