Are high efficiency and environmental protection compatible? The impact of China's environmental policies on enterprise productivity

Globally, the concept of carbon neutrality is gaining traction, and the impact of environmental policy on business has been thoroughly studied. Although research on the impact of environmental policy on the production efficiency of enterprises has been extensive, the mechanism of this effect within the enterprise remains obscure. This paper analyzes "the role process of green innovation and cleaner production" within the enterprise in terms of "environmental policy and enterprise production efficiency improvement" using an innovative approach based on the Porter effect. This paper examines the chain-mediating effect of "green innovation -> cleaner production" in "environmental policy -> enterprise production efficiency" using data from Chinese publicly traded companies. Different impacts are analyzed by separating environmental policies into environmental regulatory policies and incentive environmental policies. (1) Regulatory environmental policies promote green innovation, which assists enterprises in achieving cleaner production and improving production efficiency. (2) Incentive environmental policies do not promote green innovation but can assist enterprises in achieving green production, which improves enterprise production efficiency. The heterogeneity test of state-owned and non-state-owned enterprises yields intriguing new findings in this study. Through systematic analysis, this paper reveals the internal mechanism of the impact of environmental policy on enterprise output. Finally, policy recommendations are proposed to assist the government in achieving green economic development.