Environmental Subsidies Research Articles

Can digital technology adoption promote environmental innovation in small and medium-sized enterprises (SMEs)? Evidence from China

Despite the widespread acknowledgment in both industry and academia of the substantial potential of digital technology for fostering innovation and sustainable development, there remains uncertainty surrounding whether integrating these technologies can improve environmental innovation in small and medium-sized enterprises (SMEs) due to the liability of smallness. This paper utilizes a panel dataset comprising 1036 Chinese manufacturing SMEs listed between 2011 and 2020 to investigate the influence of different digital technology adoption strategies—specifically, digital technology adoption breadth (DTAB) and digital technology adoption depth (DTAD)—on SMEs' environmental innovation. Additionally, we examine the moderating effects of government subsidies and industrial agglomeration on these relationships. The results reveal that (1) DTAB has a negative effect on SMEs' environmental innovation; (2) DTAD positively affects SMEs' environmental innovation; and (3) both government R&D subsidies and environmental subsidies can positively moderate the relationships among DTAB, DTAD, and environmental innovation within SMEs. These findings are extended and upheld after undergoing a series of further analyses, endogeneity analyses, and robustness tests. Our research suggests that SMEs are not as suited to the broad adoption of digital technologies as large firms; instead, they should focus on the deep application of specific digital technologies to promote environmental innovation.

Retooling the regulation of net-zero subsidies: lessons from the US Inflation Reduction Act

Abstract The US Inflation Reduction Act (IRA) has heralded the advent of a new era of industrial policy within and beyond the USA. As the net-zero economy transition unfolds and national economic security paradigms entrench, industrial policy is here to stay. Net-zero subsidies are employed as multipurpose policy tools to promote domestic manufacturing, de-risk from China, and boost the net-zero transition. This new scenario prompts a fresh look at old questions surrounding environmental subsidies and their justification, actionability, and countervailability. This article makes three contributions. First, it articulates a conceptual framework to assess questions surrounding the justification of net-zero subsidies. It advocates a direct focus on their environmental effectiveness, drawing a distinction between justifiable trade-distorting effects and unjustifiable protective or discriminatory application associated with the pursuit of reshoring or geopolitical goals. Second, it employs a careful analysis of different IRA tax credits to operationalize the article’s framework and test its robustness. Third, it draws on legal and economic insights to shed some light on the environmental effects of different groups of net-zero subsidies. On these grounds, it advances a streamlined three-fold categorization and demarcates the boundaries within which different subsidies should be justifiable, non-actionable and non-countervailable.

Driving effect of digital government policy on synergy in corporate pollution reduction, carbon reduction, and green expansion

This study constructs an index on synergy of corporate carbon reduction, pollution reduction, and green expansion (PCG), and uses a difference in difference model to test the impact of digital government (DGO) on PCG. Results show that DGO significantly promotes PCG, and compared to companies without DGO, DGO can lead to a 2.4% increase in PCG. And, DGO may promote PCG by increasing environmental information disclosure, environmental subsidies and environmental regulations. In the heterogeneity, DGO has a higher promoting effect on PCG in eastern enterprises, heavily polluting industries, and state-owned enterprises. Furthermore, digital financial support, media supervision, and public participation will promote the positive effect of DGO on PCG. This study aims to provide implications for promoting PCG and empirical reference for promoting DGO.

Digital transformation and synergistic reduction in pollution and carbon Emissions——An analysis from a dynamic capability perspective

Pollution control and carbon emission reduction pose significant challenges for developing countries, and achieving synergistic reductions in pollution and carbon emissions (SRPCs) has emerged as the optimal choice. Digitization, a prevailing trend in the current era, presents new opportunities for realizing the SRPC. We utilize data from Chinese A-share listed companies from 2007 to 2022 to investigate the impact of corporate digital transformation on the SRPC. The research reveals the following. (1) Enterprise digital transformation significantly promotes the SRPC, a conclusion validated through a series of robustness tests. However, the SRPC resulting from digital transformation is characterized by weak synergy, which is primarily observed in the coordinated reduction in air pollution and carbon emissions. (2) This effect is notably stronger for companies near environmental regulatory authorities, those receiving government environmental subsidies, and state-owned enterprises (SOEs). (3) Enhancing managerial collaborative management capabilities, promoting corporate technological innovation capabilities, and alleviating financing pressure are the primary mechanisms at play. This research provides important policy and practical insights for promoting the SRPC in the context of digitization, fostering sustainable development.

Unpacking Mechanisms Behind Environmental Subsidies and Green Innovation: A Dual-Pathway Story

Unpacking Mechanisms Behind Environmental Subsidies and Green Innovation: A Dual-Pathway Story

Wind gradient exploitation during foraging flights by black skimmers (Rynchops niger).

Birds commonly exploit environmental features such as columns of rising air and vertical windspeed gradients to lower the cost of flight. These environmental subsidies may be especially important for birds that forage via continuous flight, as seen in black skimmers. These birds forage through a unique behavior, called skimming, where they fly above the water surface with their mandible lowered into the water, catching fish on contact. Thus, their foraging flight incurs costs of moving through both air and water. Prior studies of black skimmer flight behavior have focused on reductions in flight cost due to ground effect, but ignored potential beneficial interactions with the surrounding air. We hypothesized a halfpipe skimming strategy for skimmers to reduce the foraging cost by taking advantage of the wind gradient, where the skimmers perform a wind gradient energy extraction maneuver at the end of a skimming bout through a foraging patch. Using video recordings, wind speed and wind direction measurements, we recorded 70 bird tracks over 4days at two field sites on the North Carolina coast. We found that while ascending, the skimmers flew more upwind and then flew more downwind when descending, a pattern consistent with harvesting energy from the wind gradient. The strength of the wind gradient and flight behavior of the skimmers indicate that the halfpipe skimming strategy could reduce foraging cost by up to 2.5%.

Does environmental governance mitigate the detriment of greenwashing on innovation in China?

The study examines the impact of greenwashing on corporate innovation and its governance mechanisms using a sample of 1337 Chinese A-share listed enterprises from 2009 to 2021. The results indicate that greenwashing behavior inhibits corporate innovation output, adversely affecting long-term value realization. More importantly, we explore positive roles of government and corporate internal environmental governance measures in regulating corporate deceptive “greenwashing” behavior. Through environmental policy tools, such as environmental subsidies and penalties, governments can provide positive incentives and negative constraints for corporate environmental governance. Furthermore, improving green investment and board environmental background can build a virtuous corporate internal incentive mechanism. Both inhibit the costs and incentives of greenwashing, prompting enterprises to focus more on long-term development and innovation investment. Additionally, greenwashing has more significant effects in green innovation, high-tech industries, and high-financing constrained enterprises. Our findings provide new insights into the economic consequences of greenwashing and its effective governance measures.

More Incentive, Less Pollution: Environmental Responsibility of Local Cadres and Environment Governance

SYNOPSIS In this paper, we study how the environmental responsibility of local cadres shapes their environmental governance. Using the staggered implementation of the government environmental audit in China as a quasi-experiment, our difference-in-differences estimation shows that, after strengthening the environmental responsibility of city leaders, pilot cities experience a significant increase in fiscal environmental expenditure and a reduction in air pollution. The effect is more pronounced among cities whose leaders have stronger promotion incentives, but less pronounced among cities with higher economic costs on pollution governance. In addition, firms located in pilot cities exhibit a significant increase in environment-related investments and green patent applications, which is motivated by government-awarded environmental subsidies. Overall, our results shed new light on the role of the environmental responsibility of city leaders in environmental governance and provide policy implications to promote environmental, social, and governance (ESG) practice and sustainable transition in a top-down approach. Data Availability: Data will be made available on request.

Low-carbon city pilot policy and corporate environmental violations: Evidence from heavily polluting firms in China

This study examines the impact of China's Low-Carbon City Pilot Policy (LCCPP) on heavily polluting firms’ environmental violations. Using a staggered difference-in-differences (DID) model, we find that LCCPP significantly reduces heavily polluting firms’ environmental violations. Mechanism tests indicate that this reduction is driven by strengthening government green attention, increasing environmental subsidy, and environmental investment. Heterogeneity studies reveal that the policy's effects are more pronounced in state-owned enterprises, firms in less competitive industries, and firms with lower levels of management shareholding. Our research provides theoretical and empirical support for the ongoing expansion of LCCPP, highlighting its positive effects on environmental governance.

Investment Strategy and Benefit Analysis of Power and Heat Hybrid Energy Storage in Industrial Parks Based on Energy Performance Contracting

To solve the problems of a single mode of energy supply and high energy cost in the park, the investment strategy of power and heat hybrid energy storage in the park based on contract energy management is proposed. Firstly, the concept of energy performance contracting (EPC) and the advantages and disadvantages of its main modes are analyzed, and the basic scheme of EPC for parks is proposed combined with the actual demand. Furthermore, the multiple energy storage model for power and heat storage in parks is established, which includes lithium batteries and heat storage tanks. Based on this, minimizing the annual operation cost of parks is taken as the optimization goal, and the capacity optimization model for power and heat storage is constructed, which considers the investment costs, operation and maintenance costs, purchased energy costs, peak-shaving subsidy, and environmental subsidy. Finally, an industrial park is selected as an example of EPC to verify the effectiveness of our proposed investment strategy. The results show that compared with the situation before the energy-saving renovation, the park can save 35.14 ten thousand CNY in annual cost expenses. When the unit power price of the lithium battery exceeds 3900 CNY/kW, the unit capacity price exceeds 5460 CNY/kWh, the unit power price of the heat storage tank (HST) exceeds 6000 CNY/kW, and the unit capacity price exceeds 1000 CNY/kWh, the configuration of the lithium battery and HST in the park is no longer the optimal choice to perform the energy-saving renovation.

How Does Digital Transformation Improve Corporate Carbon Emission Reduction Performance? An Empirical Study on Data from Listed Companies in China

Against the backdrop of global carbon reduction, China, as the country with the highest carbon emissions, must implement carbon reduction actions more efficiently to promote the sustainable development of the global environment. Balancing their economic and environmental benefits has become an important issue for corporations, as they are crucial entities in the final implementation of carbon reduction efforts. This study selects the data of listed companies in China from 2012 to 2022 and develops a two-way fixed-effects model to verify the effect of digital transformation on corporate carbon reduction performance. The study found that digital transformation can positively promote corporate carbon reduction performance and shows heterogeneity under different conditions. Green technology innovation plays a mediating role in the relationship between digital transformation and corporate carbon reduction performance. Furthermore, environmental subsidies play a positive moderating role in the relationship between digital transformation and green technology innovation, constituting a moderated mediation model. Meanwhile, tax reduction incentives play a positive moderating role in the relationship between digital transformation and promoting corporate carbon reduction performance. This study provides empirical suggestions for balancing economic and environmental benefits for 5323 Chinese listed companies and global corporations from both internal and external perspectives, emphasizing the potential for digital transformation to drive both commercial success and environmental stewardship in the pursuit of sustainable development goals.

Can Civilized City Construction Promote Enterprise Green Innovation?

The existing research shows that when facing the trade-off between economic benefits and green innovation, enterprises often prioritize economic gains, and how to promote enterprise green innovation (EGI) has become a pressing issue that needs to be solved at this stage. Against this backdrop, China’s Civilized City Construction (CCC) policy, which emphasizes the coordinated development of economic, political, ecological, and spiritual civilization, places higher demands on enterprise environmental behaviors. This creates an opportune moment to investigate the relationship between urban governance policies and EGI. In this study, we employ a Difference-in-Differences (DID) model to examine whether the CCC policy can promote EGI and reveal its underlying mechanisms. The research findings indicate that CCC significantly promotes EGI. The policy improves EGI levels by strengthening regional environmental regulations and increasing environmental subsidy levels. This finding provides lessons for advancing enterprise sustainability strategies and new perspectives for global urban governance policy formulation and implementation.

The role of political party in firm environmental governance: evidence from China

ABSTRACT The importance of corporate environmental governance and compliance in China is on a noticeable rise. Meanwhile, as the sole governing entity, the Chinese Communist Party’s involvement in the business landscape has sparked extensive interest. In this paper, we use the difference-in-difference framework and show that the mandatory requirement to establish a Communist Party branch within a firm after 2018 significantly reduces the likelihood of receiving environmental penalties. Furthermore, our findings indicate heterogeneous effects across firms as the results are more pronounced for firms that belong to heavily polluted industries, operate in regions with low air quality, or have CEOs and executives without green experience. Additionally, we provide evidence that green innovation can serve as a strategy for firms to enhance their environmental initiatives, consequently leading to a reduction in the penalties they incur. Finally, we demonstrate that firms with Party branches undergo a simultaneous decrease in government environmental subsidies and a reduction in both air and water pollutant emissions after 2018, a series of parallel outcomes attributable to enhanced governance brought about by the Party branch. Our study offers valuable insights into the considerable influence the government has on corporate decision-making and contributes to the emerging literature on environmental compliance.

Dynamic Modeling of Environmental Subsidies

In this research, the intertemporal optimal management of subsidies offered by the environmental regulator and the dynamic conflict between two groups of economic agents involved in environmental quality are discussed. First the environmental model is examined in its optimal control management form with two state variables. The analysis of the improved model, inspecting the social planner’s decision (policy) variable, the variable which influences not only environmental quality but the national budget stock, reveals that is dependent on the growth of the national budget stock. A negative growth rate leads to the long run saddle point equilibrium, while an incremental growth rate, but less than the model’s discount rate, leads to an interesting complicated limit cycle equilibrium, for which under certain parameter values the orbit’s phase portrait can be drawn. For the dynamic game model between the social planner and natural resource exploiters, the equilibrium conditions are examined. It is rather a richer than the point equilibrium for which the cyclical strategies have great importance. Therefore, the conditions for that rich equilibrium are found. As a continuation, the paper concludes that the equilibrium condition is that the players’ discount rates are both greater than the national budget interest rate. Finally, the certain values of the equilibrium strategies and national budget stock are provided.

Does Investor Attention Affect Corporate Greenwashing? Evidence from China

Abstract Enhancing ESG performance has emerged as a crucial strategy for companies to bolster market value and competitiveness. However, this trend has sparked concerns about corporate greenwashing, where companies may selectively disclose ESG-related information to garner short-term benefits. Against this backdrop, using Chinese A-share listed companies from 2010 to 2022, we examine the impact of investor attention on corporate greenwashing. The findings reveal that investor attention significantly curbs corporate greenwashing. Mechanism analysis indicates that investor attention achieves this by alleviating corporate financing constraints and enhancing transparency in corporate information. Furthermore, moderating analysis suggests that enhancing internal controls and increasing environmental subsidies can strengthen the inhibitory effect of investor attention on corporate greenwashing. Finally, heterogeneity analysis demonstrates that the inhibitory effect of investor attention on corporate greenwashing is more pronounced in state-owned enterprises and companies facing high financing constraints. These findings not only contribute to the literature on investor attention but also offer insights for governing corporate greenwashing and advancing the dual-carbon goal. Keywords: Investor attention, Corporate greenwashing, Internal controls, Environmental subsidies, China.

The Impact of Corporate Social Responsibility on Environmental Investment: The Mediating Effects of Information Transmission and Resource Acquisition

In recent years, more and more research has focused on the impact of corporate social responsibility (CSR) on business activities. Due to the existence of two different theoretical perspectives, shareholder value theory and managerial opportunism theory, the research on CSR has reached different conclusions. Meanwhile, the motivations for environmental investments in enterprises have received attention from scholars. However, there is a lack of empirical research on the relationship between CSR and environmental investment. Therefore, this study conducts a regression analysis on the external evaluation of CSR and enterprises’ environmental investment using data from Chinese listed companies. The empirical results show a significant positive relationship between the external evaluation of CSR and enterprises’ environmental investment. The mediating tests conducted based on information transmission and resource acquisition mechanisms explain the reasons for this promotion effect, supporting the shareholder value theory. Furthermore, our research finds that this promotion effect is more significant in non-state-owned enterprises, enterprises receiving fewer environmental subsidies, enterprises disclosing environmental philosophies, and enterprises identified as key pollution-monitoring units in reports. The research findings of this study are meaningful for clarifying the economic consequences of CSR and provide practical evidence for Chinese enterprises to understand the importance of environmental investment and the government’s advocacy for enterprises to proactively engage in environmental investment.

Environmental, social, and governance performance and enterprise sustainable green innovation: Evidence from China

AbstractSustainable development is a common development model pursued by countries around the world. The environmental, social, and governance (ESG) concept has garnered significant interest across industries globally. This study extends on existing research (Fang & Hu, 2023), from the perspective of innovation sustainability, and investigates the impact of ESG performance on enterprise sustainable green innovation (SGI). For the data of 1140 Chinese A‐share listed enterprises from 2009 to 2019, the estimated result shows that the coefficient of ESG performance is 0.6640 (p < 0.05). This means that ESG advantages significantly promote enterprise SGI. And the environmental dimension performance has a bigger promoting effect. The impact of ESG on SGI is significantly positive for growth and maturity stages, state‐owned, and non‐heavy pollution industry enterprises. Green investor and environmental subsidy are important ways for ESG performance to affect SGI. In addition, the executive environmental protection experience moderates the relationship between ESG performance and SGI in a significant and beneficial way. This study proposes that government agencies should implement differentiated ESG regulation measures and enterprises can increase their reliance on stakeholders and social resources to acquire additional resources. Theoretical and practical implications of this contribute to the enhancement of enterprise SGI.

Does the issuance of green bonds nudge environmental responsibility engagements? Evidence from the Chinese green bond market

Policymakers and managers have increasingly adopted green bonds as a direct financing tool to address environmental degradation and climate change in emerging economies; however, the increasing green washing sentiments in the green bond market raise questions on whether green bonds can nudge polluting businesses to achieve green transformation. Therefore, this study joins the controversial debate by investigating the impact of green bond issuance on corporate environmental responsibilities and the potential impact mechanisms and economic consequences. Using the data of Chinese listed enterprises from 2011 to 2020 and the staggered issuance of green bonds as plausibly exogenous shocks, we determine that the enterprises in the experimental group that issued green bonds increased their environmental performance compared to their counterparts. Furthermore, this positive link is maintains after a series of robustness tests. Moreover, we identify that green bond issuance plausibly enhances environmental responsibility engagements through two governance channels, namely, internal management and external supervision. This beneficial effect appears more pronounced for subsamples of firms in low-polluting industries, without environmental subsidies and with higher managerial abilities. Furthermore, economic consequences indicate that the issuance of green bonds primarily motivates speculative shareholder benefits, as evidenced by short-term increases in stock yields but with limited impact on the short-run financial performance. Overall, these findings offer new evidence supporting that green financing tools could play a helpful hand toward environmental sustainability.

Executive's environmental background and sustainable development: Evidence from substantial green innovation

AbstractExecutive as decision makers influence the corporate sustainable development, especially their environmental experiences will be internalized in corporate management to promote the development of corporate substantive green innovation. This article empirically explores the impact of executive's environmental background on corporate substantive green innovation based on the data of Chinese A‐share listed companies from 2011 to 2019, and finds that executive's environmental background is conducive to promoting corporate substantive green innovation, which is achieved by obtaining government environmental subsidies and attracting green investors. And further research has revealed that executive's environmental background has a more significant impact on corporate substantive green innovation with higher level of environmental regulations, quality of corporate governance and environmental awareness of executives. The findings of this article not only provides a new perspective for companies to choose a green development path and enhance substantive green innovation, but also provides empirical evidence for companies to promote green transformation and introduce executive with environmental background.

The impact of climate policy uncertainty on green innovation in Chinese agricultural enterprises

This empirical study uses 2011–2021 panel data from Chinese A-share listed agribusiness11Agribusiness is the various businesses that produce, sell, and distribute farm products, especially on a large scale. companies and shows a positive association between climate policy uncertainty (CPU) and green innovation in China's agribusiness sector, this finding withstands intensive robustness testing. The study also finds that government environmental subsidies and environmental concerns positively moderate the impact of climate policy uncertainty on green innovation in Chinese agribusiness. The study shows that state-owned enterprises were more influenced than private enterprises. Green innovation in agricultural enterprises has a notably more significant impact in the eastern region of China.