Behind the rapid economic growth, the problems of environmental pollution have gradually become prominent. Environmental regulation is an important means for the government to deal with environmental problems in economic development and promote the construction of ecological civilization. Using the provincial data of China from 2005 to 2020, this paper studies the intermediary effect and threshold effect of green innovation in the process of environmental regulation affecting economic growth. The stepwise regression model of intermediary effect shows that environmental regulation promotes green innovation significantly, which further promotes economic growth. The panel threshold regression model shows that when green innovation is below 7.984 (the second threshold), environmental regulation positively affects economic growth, and when green innovation exceeds the second threshold, their marginal effects weaken. Further research shows that there is the regional specific heterogeneity effect. This paper analysis from 4 regions of China. When green innovation exceeds a certain threshold (eastern threshold is 4.382, central threshold is 6.553, western threshold is 5.037, northeastern threshold is 5.347), it decreases the marginal impact effect each region. The research results can provide reference for the government to formulate reasonable policies to balance environment and economy.
Economic growth is accompanied by environmental pollution problems usually, and environmental protection has received widespread attention. China’s booming economy relies heavily on the traditional industrial model (Wang and Wang, 2011). Serious environmental pollution is the inevitable consequence of extensive economic development, and its harm to society is gradually revealed. It is no longer feasible to rely on excessive consumption of the environment to develop economy, and China’s environmental problems have begun to become one of the key factors restricting economic development. While cheering rapid growth of the economy, we also need to focus on ecological environmental protection. Nowadays, there is a contradiction between the people’s ever-growing need for a better life and unbalanced and inadequate development, and a beautiful environment is the cornerstone of a well-being life for all people. The 18th National People’s Congress of the Communist Party of China emphasized ecological civilization construction should be placed in a more prominent position, and put forward the great idea of “Lucid waters and lush mountains are invaluable assets”. China economy has officially entered the stage of green development.
China’s environmental protection publicity starts late, people’s environmental awareness is not enough, enterprises did not take the initiative to protect the environment into the focus of enterprise production, which requires the government to adopt environmental regulations to restrict. The government has promulgated many regulations and laws related to environmental protection over recent years. For example, the Environmental Protection Law of the PRC was reformed in 2014, the Environmental Protection Tax Law was promulgated in 2016, the Yangtze River Protection Law and the Resource Tax Law were passed in 2020, the government is expressing its determination to manage the environment with practical actions. In 2021, the “3060 target” was proposed in the government work report, hoping to achieve “carbon peaking” and “carbon neutrality” at an early date. The Chinese government is constantly strengthening environmental protection, striving to improve environmental quality, hoping to promote upgrading and transformation of industrial structure, alter the traditional mode of economic growth, and promote better and faster economic development through environmental governance.
7. Conclusions and implications
This study discusses and explores the role of green innovation in the impact of environmental regulation on economic growth. Based on China’s provincial panel data from 2005 to 2020, I employ the stepwise regression model to analyze the mechanisms of environmental regulation driving economic growth, and employ the panel threshold regression model to analyze the threshold effect of green innovation.
The findings confirm that environmental regulation drive economic growth effectively. Mechanisms analysis presents that they are influenced by the intermediary role of green innovation, the specific performance is as follows: Environmental regulation can actively stimulate enterprises’ green innovation and can boost economic growth by forcing enterprises to execute green innovation. At the current period of highquality development of China’s economy, environmental regulation has an “innovative compensation” effect at the regional level as a whole, which accords with the Porter hypothesis.
In addition, the nonlinear impact of environmental regulation on economic growth is contingent on the threshold effect of green innovation, with diminishing marginal effects. There are two green innovation thresholds. When it is both below the first threshold and between two, environmental regulation has a positive effect on economic growth. But, once the second threshold is exceeded, environmental regulations have a negative impact on economic growth. Of course, I don’t think the threshold for green innovation is high, it’s below the national average. I try to examine the mechanism of the three from different regions. Heterogeneity analysis results show that the green innovation threshold in the central region is higher than the mean value of the whole nation, while the threshold in the eastern China is the lowest. The marginal effect of the central and eastern regions decreases, but both are positive. With the increasing numbers of green innovations, environmental regulation still stimulates economic growth, but velocity of increase slows down. In the western and northeastern regions, when the green innovation threshold reaches 5.037 and 5.347 respectively, environmental regulation may inhibit economic growth. This study reflects that green innovation cannot be ignored in the process of environmental regulation promoting economic development.
I try to examine the mechanism of the three from different regions. Heterogeneity analysis results show that the green innovation threshold in the central region is higher than the mean value of the whole nation, while the threshold in the eastern China is the lowest. The marginal effect of the central and eastern regions decreases, but both are positive. With the increasing numbers of green innovations, environmental regulation still stimulates economic growth, but velocity of increase slows down. In the western and northeastern regions, when the green innovation threshold reaches 5.037 and 5.347 respectively, environmental regulation may inhibit economic growth. This study reflects that green innovation cannot be ignored in the process of environmental regulation promoting economic development