Is one plus one greater than two? How Double target incentives stimulate green growth in China

Abstract

Stimulating green growth is an important element of China's economic planning. Green growth has dual attributes of greenness and growth, while economic growth targets and environmental targets respond to these two attributes, respectively. Whether the combination of dual targets is more effective than a single target is critical to understanding the dynamics of green development. Although scholars and practitioners have studied government performance targets, we know little about interaction effects of different targets in a multi-target system. This study considers the interaction effects of environmental and economic growth targets on green growth. Using panel data from China's provinces, we find both economic growth and environmental targets can drive green growth. However, these targets crowd out each other in driving green growth, implying a trade-off between economic growth and environmental protection. The crowding-out effect exhibits a clear inverted U-shaped trend influenced by environmental governance and technological support, as it is prominent mainly in provinces with moderate environmental governance and technological support. Furthermore, economic growth targets affect green growth by promoting investment in research and development, while environmental targets drive green growth by promoting industrial agglomeration. Notably, green innovation is a shared channel for both types of targets to influence green growth, making both targets crowd out each other. These findings suggest that we should value synergy between multiple targets in the future.