Temperature change and industrial green innovation: Cost increasing or responsibility forcing?

Abstract

This paper is to test the relationship between temperature change and industrial green innovation by combing data of China's average temperature change in cities with green patent database of listed companies.First, the results find that rising annual average temperature can inhibit green innovation. For every 1 °C increases in summer, green innovation reduces by 3.2%, and for every 1 °C increases in winter, green innovation increases by 1.9%. Second, rising summer temperature inhibits green innovation by crowding out research and development (R&D) funds and draining labor. While, rising temperature increases green innovation by increasing environmental responsibility and green venture capital. Third, differences in green R&D difficulty, process and objectives were also compared, temperature change has a stronger inhibition on green process innovation than green product innovation. And rising temperature inhibits green exploratory innovation and promotes green developmental innovation. Fourth, rising temperature increases green innovation in polluting firms as temperature is higher than 21 °C. And it inhibits green innovation in clean firms as temperature is higher than 27 °C. This paper can provide policy implications on climate regulation and promoting green innovation.