ORIGINAL RESEARCH article
Front. Environ. Sci.
Sec. Environmental Economics and Management
Volume 13 - 2025 | doi: 10.3389/fenvs.2025.1593549
The Impact of Environmental Tax Reform on Industrial Green Development: Evidence from China
Provisionally accepted
- Southwest University of Political Science & Law, Chongqing, China
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Introduction: The transformation of environmental protection fees into environmental protection taxes in China reflects a broader commitment to ecological civilization. This reform aligns fiscal instruments with environmental objectives, aiming to internalize environmental costs and incentivize greener industrial behavior. However, empirical evidence on its actual impact on industrial green development remains limited. This study addresses this gap by investigating how the reform affects green total factor productivity (GTFP) in key industrial sectors.Methods: We build a Difference-in-Differences (DID) model to assess the causal impact of the 2018 environmental tax change, using it as a quasi-natural experiment. A-share listed companies in industries with high levels of pollution from 2013 to 2022 are included in the sample. To further explore the transmission mechanism, we employ mediation effect models to test whether the reform influences GTFP through changes in the degree of resource misallocation and green technological innovation. Multiple robustness checks, including parallel trends test, propensity score matching (PSM), and placebo test, are conducted to ensure result validity. Results: The results indicate that the reform significantly improves industrial green development, as measured by firm-level GTFP. In state-owned and highly polluting businesses, the effect is particularly noticeable. According to mechanism testing, the policy effect is communicated through a decrease in the degree of resource misallocation and more investment in green innovation. These findings are robust across alternative model specifications and variable definitions. Discussion: This study offers new insights into how environmental tax policies contribute to sustainable industrial transformation. It highlights the importance of fiscal policy tools in steering firm behavior toward greener practices. Policymakers should focus on refining tax enforcement and complementing it with innovation incentives to amplify the reform’s effectiveness. The evidence underscores the critical role of institutional design in aligning industrial growth with environmental goals.
Keywords: Environmental Protection Fee to Tax Reform, Industrial green development, Green total factor productivity, Green development, environmental economics, Environmental Policy
Received: 14 Mar 2025; Accepted: 18 Jun 2025.
Copyright: © 2025 LU, Gou, Yang and Wu. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
* Correspondence: ZHAOYANG LU, Southwest University of Political Science & Law, Chongqing, China
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