The impact of China’s energy saving and emission reduction demonstration city policy on urban green technology innovation

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Urban green technology innovation (UGTI) is strongly tied to environmental regulations, which can successfully balance economic and environmental benefits. Selecting the panel data for 280 Chinese cities during 2006–2019, we take the energy saving and emission reduction (ESER) demonstration city policy as a quasi-natural experiment, then employ the difference-in-differences model to examine the effect and its mechanisms of ESER policy on UGTI. Empirical results show that the ESER policy can significantly promote UGTI, especially in the western region, the northern region, and cities with weak government environmental attention. At the same time, China’s ESER policy has a stronger promoting effect on UGTI in cities where environmental targets are more stringent. Mechanism analysis shows that the policy mainly promotes UGTI through two channels: increasing the proportion of science and technology expenditure in fiscal expenditure and upgrading the structure of the industry. In addition, we find that the development of UGTI has positive environmental effects by lowering carbon emissions and air pollution. The findings not only enrich the literature on environmental regulation policies and UGTI at the theoretical level, but also provide references for policymakers to specific implementation methods in further enforcing environmental regulation policies to improve UGTI.