Promoting or inhibiting? Green fiscal policy and urban green innovation

Can green fiscal policy (GFP) incentivize the proliferation of urban green innovation (GI) and be a novel catalyst for energy conservation and emission reduction within the "dual-carbon" framework? This paper explores GFP ramifications for GI by implementing a difference-in-differences model in a natural experiment centered on the "Comprehensive Demonstration City of Energy Saving and Emission Reduction Fiscal Policies". The empirical analysis reveals several key findings: (1) GFP exhibits significant augmentation at the GI level, with an observable evolutionary trend of increasing marginal impact. Importantly, these outcomes withstand rigorous robustness tests, including propensity score matching. (2) A mechanism analysis elucidates the dual impact of GFP on GI growth. GFP directly fosters GI advancement indirectly by promoting talent aggregation, expanding scientific and technological investment, and attracting external financial resources. (3) A heterogeneity analysis demonstrates that GFP enhancement of GI is closely associated with the patent category, manifesting a distinct pattern of "eastern region > other regions" and "non-resource cities > resource cities". The study's empirical findings offer crucial real-world insights to guide the Chinese government in formulating a more efficient GFP and facilitating the expansion of innovative endeavors while contributing to environmentally sustainable and high-value development.