Green taxation, regional green development and innovation: Mechanisms of influence and policy optimization

Abstract As the severity of global climate change escalates, carbon peak and carbon neutrality have emerged as international imperatives. Green taxation, a crucial fiscal strategy promoting the transition to a green low-carbon economy, demands thorough investigation regarding its efficacy and operational mechanisms. Predominantly, existing research has concentrated on the macroeconomic implications of green taxes, while their influence on regional green growth and innovation remains underexplored. This paper delineates green taxation in both a broad and narrow sense, elucidating its essence and potential in stimulating regional green progress and innovation. Utilizing panel data from 30 provinces in China spanning 2004 to 2021, a bidirectional fixed-effects model was developed for empirical analysis. Moreover, an impact mechanism model was constructed to delve into how green taxation specifically affects regional green development and innovation. Findings reveal that green taxation significantly fosters regional green growth and markedly enhances green innovation. Nonetheless, due to the resource crowding-out effect, it adversely impacts the comprehensive innovation capabilities of regional enterprises. This insight offers a fresh perspective on the paradoxical effects of green taxation, underscoring the necessity for a balanced approach in policy design and implementation. Drawing on these conclusions, the paper presents tailored policy recommendations.