Carbon Emission Reduction Effects of Heterogeneous Environmental Regulation: Evidence from the Firm Level

Abstract The paper investigates the capacity of environmental regulatory policies to effectuate carbon emission reduction (CER) at the enterprise micro-level. It delves into the intrinsic correlation between these policies through theoretical analysis and empirical assessments, scrutinising the varied effects of heterogeneous environmental regulations (ERs) such as sewage charges and environmental protection subsidies. Findings reveal that diverse ERs can bolster CER, with sewage charging ERs manifesting a more conspicuous emission reduction effect. Rigorous robustness tests validate these initial conclusions. Moreover, distinct ERs exhibit temporal lags in their impact on CER; sewage charging ERs display a diminishing trend in emission reduction efficacy, while environmental subsidies ERs exhibit dynamic superposition traits. Importantly, incentives for green innovation and enhancements in total factor productivity emerge as pivotal mechanisms by which diverse ERs propel CER within enterprises.