Carbon intensity constraint policy and firm green innovation in China: a quasi-DID analysis

Purpose This paper aims to empirically investigate the impact of the carbon intensity constraint policy (CICP) on green innovation. Design/methodology/approach This study takes the implementation of the CICP as a quasi-natural experiment and uses a quasi–difference-in-difference method to investigate the impact of the CICP on firm green innovation from a microeconomic perspective. Findings The CICP significantly limits the quality of firms’ green innovation. Among the range of green patents, the CICP distorts only patents related to CO2 emissions. The inhibitory effect is more pronounced in non-state-owned enterprises and heavily polluting firms. R&D investment and green investor are identified as the main mechanism. Practical implications These findings provide evidence for the influence of the CICP on firm green innovation, which can guide policymakers in China and other emerging economies that prioritize carbon intensity constraint targets and the improvement of relevant auxiliary measures. Social implications Governments and firms should have a comprehensive understanding of environmental policies and corporate behavior and need to mitigate the negative impact through a combination of measures. Originality/value This study contributes to the literature by providing additional empirical evidence regarding the two opposing sides of the ongoing debate on the positive or negative effects of CICP. It also provides new evidence on the policy effect of the CICP on firm green innovation, together with its mechanisms and heterogeneous influences.