What shapes the impact of environmental regulation on energy intensity? New evidence from enterprise investment behavior in China

With the deepening of economic reforms in China, the low-energy transition is increasingly relying on government policy and enterprise participation. This research thus investigates the mechanism through which environmental regulation impacts industrial energy intensity. Based on provincial data during 2005-2019, we construct a dynamic panel model to capture the linkage between environmental regulation and the energy intensity with the consideration of the mediation effect of enterprise investment behavior, i.e., technology or financial investment. Our findings suggest a significant U-shaped relationship between regulation and energy intensity, and that enterprise investment behavior serves as a bridge to mediate the role of environmental regulation in alleviating energy intensity. Such effects are more pronounced for state-owned and large-sized enterprises. These findings can guide enterprises to invest in response to these regulations to further ensure energy efficiency.