Heterogeneous green innovations and carbon emission performance: Evidence at China's city level

Abstract

Green innovation has been positioned as an effective way to balance economic development and environmental governance. However, the impact of green innovation (i.e., innovation relating to the environmentally sound technologies (ESTs)) on carbon emission performance in a large developing country, such as China, has been paid little attention. This paper investigates the impact of green innovation on carbon emission performance based on a panel data set covering 218 prefecture-level cities in China from 2007 to 2013. First, we examine whether heterogeneous green innovations have a synergistic effect on carbon emission performance using the two-way fixed effect model, instrumental variable method, and spatial econometric model. Moreover, using a causal mediation effect model, we identify four kinds of potential transmission channels of green innovation affecting carbon emission performance: energy consumption structure effect, industrial structure effect, urbanization effect, and foreign direct investment (FDI) effect. The results indicate a positive effect of green innovation and its sub-categories on carbon emission performance in China. However, a noteworthy phenomenon is that direct carbon emission-reduction innovation and green administrative innovation have a weaker effect on carbon emission performance than other kinds of green innovations. In addition, the positive effect has an evident heterogeneity in different kinds of cities. To be specific, green innovation has an evident positive impact on carbon emission performance in key cities for environmental protection, resource-based cities, non-resource-based cities, and central cities. Meanwhile, a “snowball” effect and a symbiotic effect of carbon emission performance exist in local cities and between cities, respectively. Finally, we find that green innovation significantly decreases and increases carbon emission performance through industrial structure effect and FDI effect, respectively.