GOVERNMENT GREEN CERTIFICATION POLICY AND TOTAL FACTOR PRODUCTIVITY OF HEAVY POLLUTING FIRMS: EVIDENCE FROM GREEN FACTORY CERTIFICATION

The incentive effects of green certification policies have been debated in existing literature, and we address this issue from the perspective of government green certification policies. This paper examines the impact of the government’s green certification policy on the total factor productivity (TFP) of high-polluting firms through the Green Factory Certification Policy (GFEP), a green recognition program launched by the Ministry of Industry and Information Technology (MIIT) of China in 2016. Our findings indicate that GFEP has a significant incentive effect, with firms holding certified green factory status achieving a considerable increase in TFP compared to non-certified firms. The mechanism analysis suggests that the increase in TFP of heavy polluters is primarily attributed to improvements in factor allocation efficiency and resource advantages resulting from GFEP. Further analysis reveals that the marginal effect of GFEP on TFP enhancement is more pronounced in regions with weaker environmental regulations, firms with greater capital market concerns, state-owned enterprises and smaller firms. These findings confirm the critical role of government green certification policies in promoting industrial green transformation and upgrading, providing empirical support for the future enhancement of the green manufacturing system.