Environmental Protection Tax Policy and Green Innovation of Heavy-Polluting Enterprises: Evidence from China

Since 2018, China has implemented the Environmental Protection Tax as a market-based envi-ronmental regulation tool to encourage enterprises, especially heavy-polluting ones, reduce emissions and engage in green innovation. The effectiveness of this policy promoting innovation become focal point attention for Chinese society, it directly relates coordinated high-quality development economy environmental protection, well achievement China’s “carbon peaking carbon neutrality goals”. This study evaluates effect on enterprises using micro-data listed from 2003 2019, based new market-oriented tool. We employ propensity score matching differ-ence-in-differences method (PSM-DID) follow up reveal its implementation effect. Empirical results indicate that, first, Environ-mental contributes enterprises’ R&D patents, conclusion holds through various robustness tests. Second, policy’s impact types exhibits heterogeneity, with more significant positive utility model patent than invention patent. Third, differs ac-cording regional economic enterprise ownership attributes. Finally, financing constraints do not significantly affect enterprises. These remain pro-active innovation, even under high constraints. To further promote achieve dual goals, government should continue imple-ment improve policy, leveraging