How Does Green Investment Affect Environmental Pollution? Evidence from China

China is currently undergoing an important stage wherein it is adjusting its development mode and upgrading its industrial structure. Green investment has become a major driving force through which China can achieve green and sustainable development. Based on the panel data of 30 Chinese provinces for the 2006-2017 period, this paper uses a spatial Durbin model and a dynamic threshold model to empirically analyze the impact of green investment and institutional quality on environmental pollution. The research results show that China's environmental pollution is significantly characterized by spatial dependence. Local environmental pollution is negatively impacted by green investment, but it is not affected by green investment in neighboring areas; this conclusion remains valid after a series of robustness tests. Green investment can reduce environmental pollution by improving efficiency of energy conservation and emission reduction, expanding technological innovation capabilities and upgrading the industrial structure. The regression results of the dynamic threshold model show that green investment has a nonlinear impact on environmental pollution that is dependent on institutional quality. A higher degree of regional corruption can lead to a gradual decrease in the role of green investment in reducing environmental pollution. However, improvements in marketization and intellectual property protection can increase the positive influence of green investment in reducing environmental pollution. Significant regional heterogeneity is also found in the impact of green investment on environmental pollution, and this impact gradually decreases from the eastern coast to the western region.

Automated summary

The study finds that green investment has a negative impact on local environmental pollution, but has no effect on green investment in neighboring areas; green investment can reduce environmental pollution by improving energy conservation and emission reduction efficiency, expanding technological innovation capabilities, and upgrading industrial structure; the regression results of the dynamic threshold model indicate that the impact of green investment on reducing environmental pollution is dependent on institutional quality.