Firm-level climate policy uncertainty and corporate green innovation: evidence from Chinese firms

Ongoing global warming and the increasing frequency of severe weather events have prompted countries around the world to formulate and implement climate policies. The rise in climate policy uncertainty (CPU) presents new challenges to business development; however, firms’ responses to CPU remain poorly understood. This research employs the dataset of Chinese A-share listed enterprises covering the period from 2007 to 2021 to explore the influence of firm-level climate policy uncertainty (FCPU) on corporate green innovation. The empirical findings demonstrate that a rise in FCPU remarkably drives corporate green innovation. Further analysis reveals that carbon emissions trading and government subsidies amplify this positive effect, while financing constraints and asset irreversibility weaken it. Our research provides valuable insights to encourage firms to adopt green innovation practices.