Environmental protection tax and enterprises’ green technology innovation: Evidence from China

The Environmental Protection Tax Law was officially implemented, marking the initial establishment of China's green tax system. This paper aims to estimate whether the introduction of environmental protection tax will promote enterprises' green technology innovation. Based on data from listed enterprises from 2015 to 2021, this paper takes the implementation of environmental protection tax in 2018 as a quasi-natural experiment, and uses the DID method to evaluate the impact of the implementation of environmental protection tax on the technological innovation ability of enterprises. The results show that, after the implementation of environmental protection tax, the quantity of green patents increased significantly, while the quality of green patents decreased significantly. The analysis of mechanism channel reveals that environmental protection tax policy appears to increase the number of green patents putting regulatory pressure on enterprises and increasing R&D investment, while managerial myopia inhibits the improvement of green patent quality. The changes in the quantity and quality of green patents in large enterprises are more significant. It is also found that the quantity in coastal areas decreased significantly, while the quantity in inland areas markedly increased.