Environmental Protection Tax Law Research Articles

Strengthening of rule of law and ESG performance of corporations

This study examines the impact of China's 2018 Environmental Protection Tax Law on corporate ESG performance. Using a difference-in-differences approach, the tax reform enhances ESG performance, especially for heavily polluting, state-owned, and large eastern enterprises. Debt financing and institutional investors positively influence this relationship. The research adds to our understanding of ESG factors and guides policymakers and investors.

Environmental protection tax, green innovation, and environmental, social, and governance performance

This study investigates the impact of China's Environmental Protection Tax Law, implemented as a quasi-natural experiment, on the environmental, social, and governance (ESG) performance of listed industrial enterprises from 2012 to 2022. The objective is to gain a better understanding of how this tax influences corporate behavior toward sustainability, addressing a gap in the literature regarding the effect on nonfinancial performance indicators. By employing a dataset of 9077 observations from the Wind and CSMAR databases, we determine whether the tax leads to improved ESG outcomes and fosters green innovation within these enterprises. The findings reveal that the tax significantly enhances the ESG performance of firms, particularly in environmental aspects, by encouraging green innovations. Moreover, the tax's impact is more pronounced in nonstate-owned enterprises than in state-owned ones. These results suggest that similar fiscal policies can effectively drive corporate sustainability; hence, policymakers should leverage economic tools for environmental management.

Research on the Impact of Environmental Protection Tax on Green Technology Innovation of Enterprises

Research on the Impact of Environmental Protection Tax on Green Technology Innovation of Enterprises

Study on the regulatory alienation effect of China's Environmental Protection Tax Law during the strict epidemic control period: based on a sample test of 1000 tax personnel

The enactment of the Environmental Protection Tax Law was a major event in the process of China's economic and social development. This law has achieved certain results in the first two years since enactment, but there have also been many problems. During the three-year strict pandemic control period, the normal process of Environmental Protection Tax Law implementation was impacted, causing alienation and reducing the quality of implementation. This study empirically reveals the alienation mechanism in the implementation of the Environmental Protection Tax Law by taking 1000 Chinese tax professionals, and randomly divides the sample equally into two parts, utilizing 500 samples for the initial test and another 500 samples for the robustness test. This research shows that pollutant emission monitoring (correlation coefficient is 0.07), preferential tax policies (correlation coefficient is 0.03) and the quality of tax personnel (correlation coefficient is 0.06) are not conducive to realizing the crowding-out effect of the Environmental Protection Tax Law, while preferential tax policies (correlation coefficient is 0.05), information-sharing platforms (correlation coefficient is 0.06) and the quality of tax personnel (correlation coefficient is 0.05) hinder the incentive effect, and the remaining elements passed the correlation coefficient test within certain confidence intervals. Therefore, the implementation of China's Environmental Protection Tax Law should be improved in the following ways: the accuracy of the environmental protection departments' supervision of pollutant emissions as well as the scientificity and rationality of preferential tax policies should be improved, the construction of environmental protection tax information-sharing platforms should be strengthened, and compound tax collection and management talent should be created.

Environmental protection tax law and corporate ESG performance

We analyze the bond between environmental protection tax law (EPTL) and corporate environmental, social, and governance (ESG) performance and explore the mediating role of corporate green technological innovation between the two. The study reveals a significant positive correlation between implementing EPTL and corporate ESG performance, with corporate green technological innovation acting as an intermediary. Furthermore, we find heterogeneity in the influence of EPTL on corporate ESG performance, which is primarily concentrated in non-state-owned enterprises. This study's conclusions remain valid after robustness and parallel trend tests.

Impact Study of Environmental Tax Reform Policy on Corporate ESG Performance

The concept of sustainable development is an important issue concerning the national economy and people's livelihood. With the prosperity and development of the economy and society, human beings are increasingly aware of the importance of the ecological environment. This article takes the listed companies on the Shanghai and Shenzhen stock exchanges from 2011 to 2021 as the research sample, using the double difference method to explore the impact of environmental protection tax reform on corporate ESG performance and its mechanism. The study found that the implementation of the “Environmental Protection Tax Law” has a restraining effect on corporate ESG performance. Mechanism analysis reveals that green technology innovation, social welfare expenditures, and the proportion of overseas background executives play an intermediary role in the impact of environmental protection tax reform on corporate ESG performance, with the indirect effect of green technology innovation being the largest. This article provides a new research perspective on the impact of environmental protection tax reform on corporate ESG performance and offers empirical insights for improving environmental tax policies and enhancing corporate ESG performance.

Environmental Protection tax and diversified transition of heavily polluting enterprises: Evidence from a quasi-natural experiment in China

A comprehensive evaluation of the impact of green taxes on enterprises contributes to expediting the economic transition towards environmental sustainability. This study explores the effect of environmental protection tax (EPT) on corporate diversification by leveraging the quasi-natural experiment of EPT law implementation in China. Empirical evidence reveals that, compared to non-heavily polluting enterprises, EPT increases the level of diversification of heavily polluting enterprises by affecting corporate profitability, debt capacity, and risk. Moreover, this facilitative influence is notably pronounced among non-state-owned enterprises (non-SOEs) and enterprises operating within intensely competitive environments. Further analysis shows that diversification helps heavily polluting enterprises shift to green. This transition has benefits for companies in terms of environmental penalties and operational flexibility, which improves firm viability. From the perspective of corporate diversification, this research enhances our understanding of the influence of green taxes, thus providing empirical evidence for evaluating the effectiveness of EPT.

An Empirical Study on the Short-term Impact of the Environmental Protection Fee-to-Tax Reform on Corporate Investment Efficiency

This paper uses non-financial A-share listed companies in China from 2010 to 2020 as research samples, utilizing the quasi-natural experiment conducted through the implementation of the "Environmental Protection Tax Law". The study investigates the short-term impact of the environmental protection fee-to-tax policy on corporate investment efficiency using a generalized difference-in-differences approach. The results indicate that the implementation of the environmental protection fee-to-tax policy significantly suppresses corporate investment efficiency in the short term and increases firms' inefficient investment. Furthermore, it is found that the policy exacerbates the problem of corporate overinvestment, whereas its impact on underinvestment is not significant. After conducting robustness tests by substituting the dependent variables, the conclusion remains valid. Subsequent heterogeneity analysis was conducted, differentiating between state-owned controlling enterprises and non-state-owned controlling enterprises based on the proportion of state capital, compared to state-owned controlling enterprises, the impact of the policy is more significant on non-state-owned controlling enterprises; Additionally, the policy effects across different economic regions of China were analyzed, revealing that the policy's effect is most significant in the eastern region, significant in the western region, but not significant in the central region. The conclusions of this study further enrich the empirical evidence of the micro-effects of environmental regulation, extending the research on the effects of the environmental fee-to-tax policy, and also provide suggestions for policymakers to formulate effective market-incentive-based environmental regulatory policies.

Green tax system and corporate carbon emissions – a quasi-natural experiment based on the environmental protection tax law

The green tax system is an important tool for the government to coordinate the contradiction between economic development and environmental governance using fiscal instruments, and green tax reform can play a regulatory role in carbon emissions. This study analyzes the impact of the green tax system on carbon emissions of industrial enterprises by using the difference-in-differences model based on panel data for A-share listed industrial enterprises from 2014-2021 in China. The results show that: (1) Environmental Protection Tax Law significantly reduces corporate carbon emissions; (2) Among state-owned and heavy polluting industrial enterprises, enterprises with low financing constraints and a high degree of regional marketization, this negative effect is more pronounced; (3) Environmental Protection Tax Law motivates enterprises to implement carbon emission reduction activities through two paths: increased environmental protection investment and improved green innovation, thus promoting the transition to low-carbon development.

The crowding-out effect of the environmental regulation on corporate sustainability

The analysis of the impact of China’s Environmental Protection Tax (EPT) Law on company environmental, social, and corporate governance (ESG) performance is crucial for a more comprehensive understanding of the EPT Law and to improve corporate practices. Using a difference-in-differences (DID) model with a research sample of 7,055 listed firms in China from 2012 to 2020, we found that the EPT Law significantly improved firms’ overall ESG performance. However, this improvement was mainly driven by significant increases in the environmental (E) score. In contrast, the social (S) score declined significantly after the implementation of the EPT Law, indicating a trade-off between environmental regulation and social responsibility. Further analysis also reveals that the increase in production costs, which led to a decrease in employment and wages, is responsible for the crowding-out of social responsibility. This study not only enhances our understanding of the impacts of environmental regulations on companies but also offers guidelines for policymakers to consider the negative externality of policies, which could serve as a “double-edged sword.”

Can environmental protection tax force enterprises to improve green technology innovation?

The introduction of an environmental protection tax enables a smooth shift from the sewerage charge system to the environmental protection tax scheme. This, in turn, promotes a more sustainable development of enterprise growth, emphasizing eco-friendliness. This is of immense importance in advancing environmentally aware practices and sustainability. Based on data collected from A-share listed companies in Shanghai and Shenzhen from 2014 to 2021, this paper investigates the influence of environmental protection taxes on the advancement of green technology and the underlying mechanisms. Taking the execution of the Environmental Protection Tax Law in 2018 as a quasi-natural experiment, a double-difference model is employed to examine the causal relationship between environmental protection taxes and the adoption of green technology by companies. The findings indicate that the introduction of an environmental tax could markedly enhance the extent of green technological innovation within corporations. The evidence arising from the testing mechanism implies that such a tax can encourage firms to boost their investments in research and development, upgrade their innovative human capital, and mitigate financing limitations. The study found that there is heterogeneity in the promotion effect of the environmental protection tax on the green technological innovation of businesses in different regions and provinces with varying tax burdens and types of equity capital. Further research shows that the environmental protection tax has a greater impact on the promotion of utility model patent applications for green technology innovation. This paper presents empirical evidence to support further enhancement of the environmental protection tax system. It recommends designing the environmental protection tax policy with consideration for enterprises and local conditions and bolstering the system's capacity for guiding and stimulating enterprises' green development.

Environmental regulation effect study of the environmental protection tax law during strict epidemic control: based on heavy pollution enterprises sample data test

The implementation of the Environmental Protection Tax Law was seriously affected by strict pandemic control. The Environmental Protection Tax Law imposed environmental taxes on enterprises based on measuring their pollution emissions to restrain their bad environmental behaviour and stimulate their green technological innovation ability. However, during the pandemic control period, the green technological innovation ability of enterprises was not developed. Therefore, it is necessary to optimize the environmental regulation effect of the environmental protection tax. This study is based on sample data covering heavily polluting enterprises in China collected from December 20, 2022, to January 7, 2023. It finds that the follow cost effect existed, but the value compensation effect obviously declined, which leading to a decline in the green technological innovation ability of heavily polluting enterprises. The study shows that although strict pandemic control maintained the environmental protection function of the environmental protection tax, it weakened the economic driving function, which will not only damage the long-term economic development potential but also make the environmental protection function unsustainable.Graphical

Does environmental protection tax law accelerate energy transition? Evidence from electrification of 262 cities in China

While global climate risk is increasing substantially with greenhouse gas emission, energy transition is a key approach to alleviate this concern. This paper constructs the difference in difference model (DID) and the difference-in-differences based propensity score matching model (PSM-DID) to estimate the effects of China’s Environmental Protection Tax Law on energy transition and its transmission path. The empirical results show that (1) China’s Environmental Protection Tax Law can promote energy transition through electrification, and this conclusion is still valid after a series of robustness tests. (2) China’s Environmental Protection Tax Law can facilitate energy transition by improving both the quantity and the quality of industrial structure upgrading. The findings of this paper not only enrich the literature on the energy transition and environmental tax designs in developing countries but also provide an empirical reference for the government to promote energy transition orderly by implementing environmental tax.

A study on the "Porter Hypothesis" effect of the regulatory measures of the environmental protection tax law in the post-pandemic era.

The implementation of the Environmental Protection Tax Law was a significant milestone in China's environmental tax reform. The implementation of this law was influenced throughout the three-year period of epidemic prevention and control (from early 2020 to the end of 2022). Heavily polluting enterprises are the primary focus of regulations under the Environmental Protection Tax Law. This study conducts an empirical analysis using a structural equation model, leveraging sample data obtained from heavily polluting enterprises in China. The findings indicate that during the three-year period of epidemic prevention and control, the Porter Hypothesis effect was realized in terms of tax fairness but not in terms of tax rationality. Therefore, environmental tax law reforms should be pursued and tax authorities in China should make vigorous efforts to enhance the rationality of environmental taxation. This would improve the comprehensiveness of the "Porter Hypothesis" effect, fully harnessing the dual functions of environmental protection and the economic driving force embodied by the Environmental Protection Tax Law.

Assessing the Impact of Environmental Protection Tax Law on the Market Valuation of High-Pollution Companies: A Quasi-Natural Experiment Approach in China

Assessing the Impact of Environmental Protection Tax Law on the Market Valuation of High-Pollution Companies: A Quasi-Natural Experiment Approach in China

Energy efficiency suppression and spatial spillover effect: a quasi-natural experiment based on China’s environmental protection tax law

Energy efficiency suppression and spatial spillover effect: a quasi-natural experiment based on China’s environmental protection tax law

How does the environmental protection tax law affect firm ESG? Evidence from the Chinese stock markets

The serious environmental pollution problem has been proven to harm people's health and economic development in China. Chinese authorities implemented the Environmental Protection Tax Law (EPTL) in 2018—the first environmental tax law in this country—to solve the problem. Since firms are main objects of this policy, its effect on firms' sustainable development capacity is a worthwhile but not yet discussed question. Therefore, this study adopts the Environmental, Social, and Governance (ESG) to quantify firms' sustainable development capacity and employs the difference-in-differences method to investigate the above research question using a sample of A shares listed in Chinese stock markets from 2014 to 2021. Benchmark regression and robustness tests demonstrated that the EPTL could promote heavily polluting firms' ESG, thus, confirming the Porter hypothesis' existence in China from a micro perspective. We conducted a series of additional tests to provide insight into the effects of the EPTL under different circumstances, and achieved the following important findings: a) although a time-lag effect exists, the policy effect increases over time; b) the boosting effect of this policy is stronger on higher ESG firms than on lower ESG firms; c) innovation compensation effect and government financial subsidies can exponentially increase the EPTL's effect on firm ESG; and d) this policy has an inhibiting effect on politically connected firm's ESG. Based on these findings, we provide theoretical and practical suggestions for academia and policymakers. The Chinese authorities should insist on enforcing the EPTL in the long run, encourage firms on research and development investments, and provide them more financial subsidies, so as to enhance the policy's effect. Moreover, the government should implement some supporting policies to improve the sustainable development capacity of politically connected firms.

Environmental tax and highly polluting firms' green transformation: Evidence from green mergers and acquisitions

Taking China's Environmental Protection Tax Law, implemented in 2018, as an exogenous shock, this study investigates the effect of an environmental tax on firms' green transformation behaviors. Our baseline results show that this environmental tax policy has a positive impact on promoting highly polluting firms' green mergers and acquisitions (M&As). Heterogeneity analyses show that the effect of the environmental tax on green M&As is moderated by firm characteristics (state ownership, innovation capacity, and reputation), industry ones (competition and barriers to entry), and regional ones (legal system strength, environmental pollution severity, and pollution tax rates). Finally, we find that the capital market responds more positively to green M&As in highly polluting firms after the implementation of the environmental tax. This study has important policy implications, providing empirical evidence that may be useful for corporate green transformation.

The Influence of Environmental Protection Tax Law on Urban Land Green Use Efficiency in China: The Nonlinear Moderating Effect of Tax Rate Increase

Due to the basic carrier function of land, the economic and ecological effects of Environmental Protection Tax Law (EPTL) will be reflected in the land use. Therefore, this article investigates the effect of EPTL on land green use efficiency (LGUE). To be specific, based on the panel data of 278 prefecture-level cities in China from 2012 to 2020, LGUE is evaluated through a global super efficiency epsilon-based measure (EBM) with unexpected output. Then, the reform of “sewage fee-to-tax” is regarded as a natural experiment to accurately evaluate the effect of EPTL on LGUE. The result that the implementation of EPTL significantly drives LGUE is confirmed. The mechanism tests show that the implementation of EPTL enhances the intensity of green innovation, promotes the optimization of industrial structure, and thereby improves LGUE. Moreover, we find that the moderating effect of tax rate increase is nonlinear and exhibits an inverted U-shape. That is, below a certain value, the tax rate increase will strengthen the EPTL’s ability to improve LGUE. However, after exceeding the value, the tax rate increase will weaken the EPTL’s ability to improve LGUE. Targeted suggestions are proposed for improving the environmental protection tax system and LGUE.

Green financing and environmental risk mitigation: is environmental protection tax law that important?

This research examines green finance's role in mitigating environmental concerns in China. The significance of the tax code for environmental protection is examined in detail. The research examines the association between green financing and lowering environmental hazards using regression analysis tests, dummy estimation techniques, and robustness analysis on data collected between 2003 and 2018. This research demonstrates that the Environmental Protection Tax Law is a valuable policy instrument for advancing environmentally responsible financing and addressing environmental issues. Green money was shown to be associated with lower environmental hazards. This study's results imply that tax legislation has been implemented to safeguard the environment in China, and more money has been placed into environmentally beneficial initiatives. The impact of environmental protection legislation on greenhouse gas emissions, urbanization, and CO2 emissions is also highlighted. These findings are significant for environmentalists, policymakers, and the financial and banking sectors because they demonstrate how to develop effective strategies to advance green finance and mitigate ecological threats.