Impact of environmental taxation, green innovation, economic growth, and renewable energy on green total factor productivity

Abstract

The issue of environmental degradation and depletion of resources is getting serious despite multiple meetings and commitments by world leaders. This research argues that nations cannot achieve green productivity goals without imposing substantial penalties on carbon emissions and limiting economic growth. Using the data from twelve Chinese provinces, this research studies the role of environmental tax, renewable energy, green innovation, and economic growth in green total factor productivity (GTFP). The data is analyzed from 2010 to 2021 using Fully Modified and Dynamic Ordinary Least Squares econometric techniques. The robust analyses indicated that strong environmental taxes are significantly facilitating the Chinese government to push firms toward green productivity. Moreover, green innovation and capitalizing on renewable energy also build Chinese firms' momentum towards GTFP. However, the enormous economic growth rate is a significant hurdle toward GTFP and impacts it negatively. The findings encourage the developing nations to follow China's footprints by taxing companies for carbon emissions and capitalizing on renewable liveliness and green innovation to counter ecological challenges and achieve green financial development.