Environmental Taxes and Corporate Green Transition: Evidence from Chinese Manufacturing Firms

In China, the environmental protection tax constrains and incentivizes firms to cut emissions and lift efficiency. To examine the effect and mechanism of environmental regulation as a driver of corporate green transformation, this study uses data on Chinese listed manufacturing firms from 2011 to 2022. It takes the 2018 environmental fee-to-tax reform as a quasi-natural experiment and employs a difference-in-differences model. The core DID coefficient is 0.0088 (p < 0.05). After the reform was implemented, manufacturers in higher-tax regions achieved better green transformation by increasing pollution costs, adjusting investment and improving executives’ green awareness. The policy effects were more pronounced for low-profit, non-state-owned, non-patent and labor-intensive firms in regions with higher tax burdens. Additionally, the policy effect exhibited a time lag. The incentive effect was stronger for heavily polluting enterprises, and the policy simultaneously boosted corporate economic performance. Accordingly, we propose broadening the taxable scope, tightening supervision, optimizing tax incentives and adopting targeted policies to support corporate green transformation.