Is technological innovation the effective way to achieve the "double dividend" of environmental protection and industrial upgrading?

Abstract

In recent years, the global emphasis on environmental protection issues has gradually increased. The existing literature has been divided on whether environmental regulation promotes or inhibits industrial development. Can the innovation-driven strategy proposed by China achieve a win-win situation for both? This paper attempts to investigate the technology innovation of China's three major economic zones in dual environmental regulation effect on industrial structure upgrade. The research was conducted based on Intermediary Effect Model and employing the technique of Image Analysis, panel data of 30 Chinese provincial from in 2005 to 2017 were selected and analyzed. The results demonstrate that the direct effect of formal environmental regulations (ER) on industrial upgrading is an inverted "U" shape, and it is positively affecting industrial upgrading through technological innovation strategies. However, the mediating role of technological innovation under the informal environmental regulation (IER) is negative. The effect of the innovation-driven strategy has regional heterogeneity, and marketization is conducive to industrial upgrading, but increasing dependence on foreign trade is not conducive to industrial upgrading. The research above politically suggests that China should further strengthen formal and informal environmental regulations, the informal environmental regulation system should be improved, and feedback mechanisms such as laws should be established. Meanwhile, the government should carry out innovation-driven strategies based on local conditions, improve the innovation mechanism, and enhance the diffusion of technological innovation.