How Environmental Taxation Drives Corporate Green Investment: Evidence from Innovation, Financing, and Heterogeneous Impacts of Pollution Intensity

Environmental taxation, as a market-based regulatory instrument, has the potential to internalize pollution externalities while also promoting the shared goals of environmental protection and economic development. This study investigates the impact of China’s Environmental Protection Tax in 2018 on corporate green investment using a Difference-in-Differences (DID) model and a dataset of A-share listed businesses from 2012 to 2023. Our empirical results show that environmental taxation strongly increases green investment among heavy-polluting enterprises, a finding that holds significant across a range of robustness tests. According to mechanism analysis, the policy functions through two principal channels: an innovation effect that encourages technical upgrades and a financing effect that reduces information asymmetry and credit constraints. Furthermore, the policy has a threshold characteristic: enterprises with higher pollution intensity show more pronounced improvements in ESG performance and investment incentives. This paper gives policy evidence for integrating environmental taxation with green finance to enhance sustainable development, as well as theoretical insights and practical implications for accelerating business low-carbon transition under environmental regulation.