Environmental regulation and green total factor productivity in China: A perspective of Porter’s and Compliance Hypothesis

Abstract

Green total factor productivity (GTFP) growth is an essential route to realize the target of carbon peak and carbon neutrality. Chinese government has implemented several environmental regulations (ER) to accelerate GTFP growth. However, the influencing path of ER on China’s GTFP growth is still puzzled. This paper based on Porter’s and the Compliant Hypotheses, employs super-efficiency Epsilon-based measure (EBM) model and Malmquist-Lunberger (ML) index under meta-frontier to estimate the provincial GTFP growth from 1998 to 2018. A Systematic Generalized Method of Moments (SYS-GMM) model was applied to probe the nexus between ER and GTFP growth from the perspective of industrial structure upgrading and technological innovation. The results reveal that the average ML index is 0.955, while efficiency change (EC) and technology change (TC) index are 1.003 and 0.953. The Porter’s hypothesis was confirmed refuting the Compliance Cost Hypothesis. Environmental regulation directly promotes China’s GTFP growth. ER can also facilitate industrial structure rationalization (ISR) and industrial structure advancement (ISA), which further promote China’s GTFP growth. Green technological innovation (GTI) and production technological innovation (PTI) mediates between ER and GTFP growth in China. Hence, the Chinese government should strengthen the ER for industrial structure upgrading, technological innovation, and GTFP growth in China.