Is environmental regulation effective in promoting the quantity and quality of green innovation?

Green innovation (GI) is an important means of achieving a win-win outcome in the form of both economic development and environmental protection. Using a unique Chinese Patent Census Database to identify the quantity and quality of GI in each province and panel data for Chinese industrial sector in 30 provinces from 2002 to 2015, we investigated the impact of environmental regulation (ER) on GI in China. This study presents the first attempt to identify green innovation quality in China. Empirical results show that there is an inverted-U relationship between ER and GI. The heterogenous effects are further investigated in order to obtain more accurate policy implications. The results indicate that the impact of ER on GI is insignificant in the central and western regions, implying the necessity of adjusting ER policies in these regions. Second, the inverted U-shaped relationship between ER and GI only occurred in provinces with high state-owned enterprise (SOE) ratio, figuring out the special role of Chinese SOEs in promoting GI. Third, the impact of ER on GI is insignificant in regions with high levels of pollution, indicating high potential of green innovation and policy adjustments there.