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<p>The post-pandemic era and China’s dual carbon goals have intensified the urgency for sustainable industrial recovery, particularly in energy-intensive sectors. As a pioneering market-based environmental policy, China’s Differential Electricity Pricing (DEP) aims to incentivize green innovation by internalizing environmental costs. However, its effectiveness remains contested, with limited empirical evidence on how DEP influences firms’ innovation strategies. Utilizing data from the China Industrial Enterprise Database (CIED) and green patent filings (1998–2013), this study employs a PSM-DID approach to examine DEP’s impact on green innovation. We distinguish between substantive and symbolic innovation, revealing a dual effect: while DEP suppresses substantive green innovation due to heightened financial pressures, it promotes symbolic compliance. Mechanism analysis further highlights the role of profit margin compression in driving firms’ short-termism. Heterogeneity analysis shows that DEP’s inhibitory effects are more pronounced in state-owned enterprises, highly competitive sectors, and energy-dependent regions. These findings challenge the linear narrative of market-driven environmental policies and underscore the need for policy refinements that balance environmental rigor with firms’ financial realities. Our study not only fills a critical gap in the literature on market-based environmental regulation but also provides actionable insights for policymakers navigating the complexities of industrial green transitions.</p>

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Does differential electricity pricing stimulate green innovation in firms? Evidence from China

  • 期刊论文

  • 发表日期：

    2025年7月8日

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  • Aidi Kou,
  • Siyi Liu,
  • Jia Si

摘要

The post-pandemic era and China’s dual carbon goals have intensified the urgency for sustainable industrial recovery, particularly in energy-intensive sectors. As a pioneering market-based environmental policy, China’s Differential Electricity Pricing (DEP) aims to incentivize green innovation by internalizing environmental costs. However, its effectiveness remains contested, with limited empirical evidence on how DEP influences firms’ innovation strategies. Utilizing data from the China Industrial Enterprise Database (CIED) and green patent filings (1998–2013), this study employs a PSM-DID approach to examine DEP’s impact on green innovation. We distinguish between substantive and symbolic innovation, revealing a dual effect: while DEP suppresses substantive green innovation due to heightened financial pressures, it promotes symbolic compliance. Mechanism analysis further highlights the role of profit margin compression in driving firms’ short-termism. Heterogeneity analysis shows that DEP’s inhibitory effects are more pronounced in state-owned enterprises, highly competitive sectors, and energy-dependent regions. These findings challenge the linear narrative of market-driven environmental policies and underscore the need for policy refinements that balance environmental rigor with firms’ financial realities. Our study not only fills a critical gap in the literature on market-based environmental regulation but also provides actionable insights for policymakers navigating the complexities of industrial green transitions.