The Role of Different Fiscal Policies in Inducing Environmental Innovation and Enhancing Firm Competitiveness

This study examines the relationship between three fiscal policy instruments, environmental innovation, and firms’ competitiveness. We select panel data of firms listed on heavy energy consumption in China’s manufacturing sector as the sample. The results show that environmental taxes have positive impacts on firms’ incremental environmental innovation but negative impacts on firms’ radical environmental innovation, while tax incentives have a positive impact on firms’ radical environmental innovation and environmental subsidies have negative impacts on firms’ incremental environmental innovation. In addition, only radical environmental innovations have a positive impact on firm competitiveness.