Environmental Regulation, Green Technology Innovation, and Industrial Green Transformation: Empirical Evidence from a Developing Economy

In this paper, to facilitate a green transition in developing economies globally, China is utilized as a standard case study. China has proposed the dual objectives of “carbon peaking” and “carbon neutrality”, where industrial green transformation has emerged as a critical avenue for high-quality industrial development. This paper assesses the extent of China’s industrial green transformation utilizing the SBM-ML model based on provincial panel data from 2004 to 2018 and empirically analyzes the intrinsic mechanism of environmental regulation and green technology innovation in China’s industrial green transformation. Three primary research results are drawn in this paper, which are as follows: (1) innovation compensation effects are generated and environmental regulation and industrial green transformation are positively correlated; (2) environmental regulation’s effect on the industrial green transformation is greatly enhanced under the moderating role of green technology innovation; (3) environmental regulations’ effects on the industrial green transformation differ in time and space. This influence is extremely prominent in eastern and western China but minimal in central China. On account of the introduction of inappropriate environmental restraints, China’s inter-regional pollution transfer has been intensified, leading to the general situation of China’s industrial green development being poor. This research seeks to put forward suggestions from the perspectives of policy applicability, green innovation system formation, and regional policy execution precision, so as to give reference methods for China and global industrial green transformation.