The effect of information disclosure on low-carbon innovation

Abstract

Using policies to stimulate low-carbon innovations is vital for a more sustainable and low-carbon economy. While the importance of information disclosure policies, considered as a third-wave regulation, has been increasingly recognized by governments, research exploring its effect on low-carbon innovation, especially in developing countries, remains limited. Using patent data from the IncoPat database as a proxy for innovation, this study examines the impact of the Environmental Information Disclosure Decree (EID) on low-carbon innovation in China. The results show that the EID policy encourages low-carbon innovation and that this effect strengthens over time. Specifically, the EID policy induces more low-carbon innovations by alleviating information asymmetry, as evidenced by improved efficiency in governments' traditional environmental regulation, enhanced firms' involvement, and increased public participation. Further heterogeneity analyses conclude that the effect of EID on low-carbon innovation varies depending on the firm types and city attributes.