Do Heterogeneous Environmental Policies Improve Environmental Quality While Promoting Economic Growth?

The long-standing model of high energy consumption growth of China has put the country at a market disadvantage in terms of clean technological innovation and clean goods production. With the support of national policies, China’s environmental industry has achieved rapid development. However, the key to establishing a long-term effective mechanism is how to encourage enterprises to develop and use green and clean technologies. Thus, we construct a theoretical model related to environmental policies and then derive the impact of heterogeneous environmental policies on different research and development (R&D) approaches. The environmental and economic effects of heterogeneous environmental policies are then explored by incorporating environmental quality and economic growth into the model. Next, we evaluate the policy effect based on the panel data of prefecture-level cities in China from 2009 to 2016. In a further discussion, we measure the decoupling indices of carbon emissions and economic growth for each of the 281 prefecture-level cities in China using the Tapio model. Through theoretical derivation and empirical analysis, this paper provides a more comprehensive study of the green bias effect of environmental policies. The results show that environmental policies can significantly promote green technological innovation regardless of the R&D approach adopted by firms. The difference is that when firms conduct their own R&D, the sector’s R&D efficiency parameters determine the direction of technological innovation steering. When technological innovation is introduced externally, the substitution relationship between sectoral products determines whether environmental policy is effective. Finally, the combination of environmental regulation and government subsidies is more effective in green-biasing technological innovation.