Green technology innovation under differentiated carbon constraints: The substitution effect of industrial relocation

The relationship between the carbon intensity constraint policy (CICP) and green technology innovation (GTI) has been well documented in the literature. However, the allocation method of the carbon abatement target is often ignored. The allocation method plays a decisive role in the policy effect. After alleviating the possible endogenous problems through quasi natural experiment, we find that the CICP with the special allocation method promotes GTI in the western provinces but inhibits GTI in the eastern provinces. Especially, the positive impact in the western provinces presents an intensifying trend. To discuss the potential mechanism, we further construct a three-dimensional panel, which contains 1.84 million observations. Our macro and micro evidences reveal that manufacturing firms in the eastern provinces tend to move westward under carbon constraints rather than GTI. In other words, the industrial relocation has a substitution effect on GTI, which further explains why the CICP inhibits GTI in the eastern provinces. The above findings offer targeted policy reference for regulators and government departments concerned with the issues of carbon emission reduction and GTI.