International Journal of

Environmental Research
and Public Health

Article
Study on the Impact of Environmental Tax on Industrial
Green Transformation
Yang Shen * and Xiuwu Zhang

Institute of Quantitative Economics, Huaqiao University, Xiamen 361021, China

* Correspondence: [email protected]

Abstract: Tax revenue is one of the essential means through which the government controls the macro-
economy and plays a vital role in promoting environmental protection and sustainable development.
This study takes Chinese panel data from 2004 to 2020 as sample observations, uses the SBM-GML
index method to measure industrial green total factor productivity, and then uses econometric
methods such as the two-way fixed effects model and instrumental variable method to analyze the
impact of an environmental tax on industrial green transformation. It is found that the generalized
environmental tax represented by vehicle and vessel tax, resource tax, and urban land use tax has
a significant positive effect on industrial green transformation. After a series of robustness tests
and the exclusion of endogeneity, this conclusion remains valid. The research shows that credit
governance, the agglomeration of producer service, and their co-agglomeration with manufacturing
are important adjustment mechanisms. Among them, credit management is special and compulsory,
greatly restricting the environmental pollution behavior of industrial enterprises, and encourages
enterprises to make green investments and to actively improve production processes.

Keywords: resource tax; environmental regulation; green development; punishment for trust-breaking;
industrial agglomeration

Citation: Shen, Y.; Zhang, X. Study

on the Impact of Environmental Tax
on Industrial Green Transformation. 1. Introduction
Int. J. Environ. Res. Public Health 2022, Since humanity entered the era of industrialization, the ecological environment has
19, 16749. https://doi.org/10.3390/ been not only the most oversized public good, but has also become the most easily dam-
ijerph192416749 aged good [1,2]. Unlike the industrialization process in developed countries, China has
Academic Editor: Paul B. Tchounwou
developed from an agricultural country to a country in the middle and late stages of in-
dustrialization stage, taking only a few decades to complete the industrialization process
Received: 25 October 2022 that took developed economies hundreds of years. China is a latecomer to the worldwide
Accepted: 12 December 2022 industrial revolution and represents a miracle of rapid industrial development and long-
Published: 13 December 2022
term social stability. The modernization of China’s manufacturing industry is a strategic
Publisher’s Note: MDPI stays neutral model of time for space, which determines that the industrial development model must
with regard to jurisdictional claims in be a “high-input, high-consumption, high-emission” extensive economy. With the rapid
published maps and institutional affil- development of industry, China’s manufacturing industry is facing huge problems, such
iations. as resource shortages, air pollution, and the destruction of the ecological environment,
which seriously restrict sustainable economic development. Green development is the
key to solving the bottleneck of resources, energy, and environment and is the only way
to promote the intensive development of the manufacturing industry. Currently, China
Copyright: © 2022 by the authors. is transitioning from the middle stage of industrialization to the late. Accelerating green
Licensee MDPI, Basel, Switzerland.
industrial development has become the only way to promote ecological progress, a new
This article is an open access article
type of industrialization, and high-quality development [3,4]. The Made in China 2025
distributed under the terms and
initiative, launched in 2015, has fully implemented the relevant requirements for ecological
conditions of the Creative Commons
progress. Putting forward the “comprehensive implementation of green manufacturing” as
Attribution (CC BY) license (https://
a critical task called for strengthening the promotion and application of energy-saving and
creativecommons.org/licenses/by/
4.0/).
environmental protection technologies, processes, and equipment. We will further promote

Int. J. Environ. Res. Public Health 2022, 19, 16749. https://doi.org/10.3390/ijerph192416749 https://www.mdpi.com/journal/ijerph
Int. J. Environ. Res. Public Health 2022, 19, 16749 2 of 18

cleaner production and implement the “green manufacturing project”. How to coordinate
industrial adjustment, pollution control, and ecological protection; promote carbon reduc-
tion, pollution reduction, green expansion, and growth; and promote ecological priority,
conservation, and intensive green development have practical significance.
Fiscal and taxation policies are essential to promoting green development and helping
to reduce pollution and carbon emissions [5,6]. The negative externalities of the envi-
ronment mean that green development is unable to rely on a single market regulation
mechanism. The environmental regulation tool is an effective external driving force. It
can exert cost pressure on enterprises, thus making industrial enterprises produce green
products. The introduction of environment-related taxes plays a guiding function through
the multiplier effect of “directional induction” and “rent creation”. It has an impact on the
industrial structure of the manufacturing industry. Taking the resource tax as the represen-
tative, through the ad valorem levy, a direct adjustment mechanism linking the resource tax
with the resource price is established, which will guide market players to comprehensively
develop and utilize resources and improve total factor productivity. It is the primary source
of industrial energy consumption and environmental pollutants. In a sense, promoting
the green development of industry is the only way that the grand blueprint for building
a beautiful China to be realized smoothly. Since the development of the industrial sector
has aggravated resource consumption and environmental pollution, this fact is clear. Thus,
starting from the industrial sector, exploring the impact of ET on the green production
of industrial enterprises will help to accelerate the high-quality development of China’s
manufacturing industry.

2. Literature Review
ET originated from the theories of negative externalities proposed by welfare economists.
After the upsurge of tax reform in western countries, it was widely introduced into tax
systems in many countries in the late 1990s [7]. Because of the purpose of green tax, it has a
natural connection with economic growth and green development. Some scholars have
discussed the economic effect of green tax.
According to the “compliance cost” proposed by Gray and Shadbegian [8], some
scholars believe that the collection of environmental tax will increase the cost of enter-
prises, distort the allocation of resources, and hinder the improvement of green total factor
productivity [9]. With the wide application of the CGE model in the environmental tax
effect, this viewpoint has been further strengthened. Bovenberg and Mooij [10] believed
that in an economic environment with tax distortions, the introduction of environmental
taxes aggravated factor distortions, which strengthened the marginal social damage caused
by environmental pollution and was not conducive to the improvement of economic per-
formance and environmental performance. Yuan and Xiang [11] investigated the impact
of environmental regulation on green development by constructing an extended Crepon–
Duguet–Mairesse (CDM) model and found that environmental regulation promoted the
improvement of energy efficiency and labor productivity in the short term. However, this
model only improves energy efficiency and hampers labor productivity in the long run.
Chintrakarn [12] posits that the cost pressure caused by environmental regulation was the
main reason for the low technical efficiency of the manufacturing industry. Richardson and
Chanwai believe that the industrial energy tax implemented in the Northwest of England
has not led to significant investment in energy efficiency technologies or in renewable fuels
and that the tax has had a relatively modest and discretionary social impact [13].
Other scholars, based on the “innovation compensation” proposed by Porter [14], be-
lieve that collecting various environmental taxes helps improve environmental quality and
production efficiency. That is, there is a “double dividend” of environmental taxes. Green
fiscal and taxation policies can effectively stimulate the rapid development of products
such as clean energy, low-carbon industry, green technology, and natural carbon sinks.
Jaffe and Palmer [15] proposed the “narrow Porter hypothesis” based on Porter’s theory,
that is, that flexible regulation produces a greater “incentive effect” for innovation. Li and
Int. J. Environ. Res. Public Health 2022, 19, 16749 3 of 18

Shi [16] proposed an improved Super-SBM model with unintended output and found that
government regulation significantly improved energy efficiency through model calculation,
which verified the correctness of the Porter hypothesis to a certain extent. Karydas and
Zhang [17] found that green taxation can stimulate innovation and promote economic
growth in the long run, even with diminishing margins. Wang et al. found that a carbon
tax could reduce greenhouse gas emissions by 8.6% in the short term and reduce PM2.5
emissions by 0.9% and 5.7% in the short and long term, respectively [18]. Fan et al. [19]
believe that when implementing environmental tax policy, firms will be motivated to invest
more into pollution control because the cost of penalties on firms rapidly increases as
the environmental tax rate rises, the negative impact of pollution on business production
continues to deepen, and the marginal return on energy input begins to fall.
In conclusion, there are many studies in the existing literature that focus on the impact
of an environmental tax on environmental quality and reach certain accepted conclusions.
However, the impact of an environmental tax on economic growth still needs to be further
deepened, especially with regard to the lack of direct evidence of industrial development.
Therefore, this study verifies the impact of an environmental tax on green industrial
transformation from the perspective of environmental regulation. From the perspective of
innovation, credit governance and industrial agglomeration are introduced as moderating
variables and a statistical model is used to seriously assess the multiple impact mechanism
of an environmental tax on green industrial production. Finally, in the robustness test, a
policy evaluation of the water resource taxes levied in 2016 and 2017 is conducted.

3. Theoretical Framework and Research Hypotheses

3.1. The Direct Impact of ET on IGT
Pollution has a negative externality, so it is difficult to solve its adverse effects by
relying solely on market forces [20]. The primary purpose of the environmental tax is to
encourage companies to change their production strategies, use more environmentally
friendly technologies, encourage consumers to use clean energy, and reduce emissions, thus
reducing the harm to the environment [21,22]. Different from the viewpoint of neo-classical
economics that rising costs crowd out profits, Porter’s hypothesis examines the innovation
compensation effect of environmental regulation on improving business performance from
the dynamic perspective of the enterprise life cycle [23]. According to this theory, well-
designed environmental regulation tools can encourage enterprises to carry out green R&D
activities and enhance their market competitiveness, thus partially or even wholly offsetting
the cost increase or profit reduction brought about by environmental regulations. As the
hypothesis of “Double Dividend” assumes, environmental tax improves environmental
quality (the green dividend) and reduces tax distortions (the blue dividend) at the same
time. Revenues from environmental taxes are recycled to correct other distortions in the
economy, which also create more jobs and reduce economic inefficiencies [24–26]. The New
Keynesians further extended the Porter hypothesis by pointing out that environmental
regulation can help restrain the “self-control” problem caused by the current interest
preferences of enterprise agents and stimulate their innovative investment.
Theoretically speaking, with the help of administrative power, we can achieve the goal
of preventing environmental pollution and realizing green transformation. However, the
environmental regulation tool of administrative order cannot promote sustainable energy
conservation and emission reduction. When emissions meet government limits, companies
lose the incentive to buy clean equipment or innovate green technology. In addition, admin-
istrative control is mainly driven by the government, and the government and the public
usually bear its cost, so the implementation cost is high. Environmental tax implements
the “polluter pays principle”, the “paid use principle” and other related requirements, and
the net environmental policy is organically integrated with economic policy. The ecolog-
ical environmental service fees, environmental damage fees, and pollution control fees
directly affect the commodity price, service prices, and various prices. Environmental tax,
in the form of price guidance, transmits technological innovation and cleaner production
Int. J. Environ. Res. Public Health 2022, 19, 16749 4 of 18

as favorable market signals to enterprises. Suppose the tax that enterprises pay due to
pollution is much higher than the cost of pollution control. In that case, enterprises will be
more inclined towards technological innovation and the use of environmental protection
equipment. At the same time, environmental tax can also realize recycling by subsidizing
renewable energy projects and energy-saving technologies to promote the development
of renewable technologies [27]. Therefore, environmental tax increases the costs of an
enterprise through economic incentives, and its influence on the manufacturing industry
is mainly manifested in the form of “Porter effect” enterprises with high pollution, high
energy consumption, and low efficiency, which are forced to withdraw from the market
or make green transformations because of the cost constraints of an environmental tax.
Environmental constraints have raised the threshold of market entry, making it difficult for
potentially inefficient and energy-intensive enterprises to enter the market. The production
and operation of clean enterprises are less affected by environmental constraints, and the
regional average green total factor productivity is therefore improved. According to the pol-
lution refugee hypothesis, introducing an environmental tax will cause the high-polluting
enterprises in the region to transform into enterprises with relatively loose environmental
supervision. It will also reduce the number of polluting enterprises within the jurisdiction
in order to achieve the purpose of environmental protection. Based on the above discussion,
hypothesis 1 is proposed.

Hypothesis 1: Environmental taxes can promote the green transformation of industry.

3.2. The Adjustment Effect of Credit Management

The institution-based view creates a dynamic interaction between institutions and
organizations, and managers and enterprises make rational decisions under institutional
constraints [28]. In order to survive and progress in a competitive market, enterprises
need to achieve their set goals and be bound by a formal system. With regard to the pure
public goods of the ecological environment, it is even more necessary for administrative
departments to formulate and perfect related environmental supervision policies and
strengthen law enforcement. Regulatory measures such as tax incentives, income and
pollution charges, and environmental disclosure cannot ultimately promote China’s indus-
trial green transformation, although these measures have achieved good results in other
countries [29,30]. There are many reasons for this predicament. From the government’s
point of view, since the reform of the commercial system, the number of market players has
increased dramatically, while the regulatory authorities are limited by the number of law
enforcement officers and the lack of detection technology, as well as the fact that it is difficult
to identify potential illegal pollution. From the enterprises’ point of view, green innovation
requires sustained and stable financial support, but endogenous financing is generally
challenging when it comes to meeting innovation needs. Technological transformation
under the constraints of capital will occupy the capital elements in other production links.
As long as the output income is higher than the emission cost, rational decision-makers will
not take the initiative to make green investments. Unlike market-motivated environmental
regulation tools, green credit and credit control policies are highly specific and mandatory,
which profoundly impact industrial enterprises’ environmental pollution behavior.
From 2013, China’s environmental authorities, as well as financial and other depart-
ments, will jointly punish economic entities that have been found, based on information
obtained, to have behaved in a way that threatened in environmental protection. Once
on the trust-breaking governance list, the production and operation of enterprises will be
seriously affected. Not only will they suffer from frequent supervisory spot checks, but
they will also be “vetoed by one vote” when dealing with public affairs, and they may also
face stricter financing constraints [31]. Yin et al. [32] believe that collective punishment has
dramatically increased the cost of environmental violation and dishonesty. For enterprises
caught breaking the promise by a correctional center, their marginal cost will increase
sharply, and their social image will be affected. In contrast, loyal subjects will be able to
Int. J. Environ. Res. Public Health 2022, 19, 16749 5 of 18

enjoy green channels or preferential resources in market transactions, government pro-

curement, and capital acquisition. The environmental credit system not only evaluates the
environmental behavior of enterprises, but also the environmental ethics, environmental
attitude, and environmental behavior preparation of enterprises [33]. After implementing
the green credit and trust-breaking punishment policies, some heavily polluting enterprises
will actively fulfill their social responsibilities and communicate their “green” signal to
the public through a good environmental, social, and governance (ESG) performance.
Flammer [34] believes that green bonds can be used as a reliable signal of enterprises
to the environment. Issuing green bonds is not a superficial “floating green” tool, but
enhances the green R&D investments of enterprises. Generally speaking, credit-based
supervision, rewards, and punishment have an obvious target orientation, which makes
enterprises more willing to eliminate outdated equipment and actively improve production
technology. Credit governance is a helpful supplement to the non-mandatory features of
green taxation and helps stimulate the endogenous power of the green transformation of
industrial enterprises. Based on the above discussion, hypothesis 2 is proposed.

Hypothesis 2: Credit management can strengthen the positive relationship between green taxation
and green transformation of industry.

3.3. Regulating Role of Industrial Agglomeration

The theory of the new industrial zone points out that the enterprise organizations
gathered in the production complex of a social region can form a highly specialized division
of labor or subcontract to form a long-term stable relationship based on mutual trust. This
division of labor and cooperation helps to spread knowledge and information among
enterprises and brings about the efficiency and mobility that a single producer cannot
realize, thus extending the industrial value chain. From the perspective of resources,
industrial agglomeration and its scale effects are important driving forces for regional
economic growth. The rapid development of the regional economy promotes the centralized
utilization of production factors such as the labor force, capital, technology, and data.
Enterprises in the agglomeration area gradually become symbionts. Firms within the region
share infrastructure, capital externalities, and pools of labor reserves [35]. This sharing
mode enables related technical information to be quickly and accurately converted into
design specifications and equipment parameters, improves the flexibility of both assets and
the specialization of production methods, and helps to improve the efficiency of resource
utilization. Under the influence of technological externalities and joint actions, enterprises
in clusters enjoy higher collective efficiency. Tacit knowledge and skilled workers can
interact and communicate more freely within the industry, which helps to reduce the
average technological innovation cost of a single enterprise and further improve the overall
innovation capability in the region. Therefore, industrial agglomeration can affect industrial
output efficiency, reduce environmental pollution and energy consumption, and promote
green industrial transformation through scale effects and technological progress.
According to the theory of industrial symbiosis and agglomeration, enterprises clus-
tered in a specific range have the advantages of circular integration, green technology
externalities, and increasing new returns through energy exchange, material exchange,
and information exchange to realize the organic unity of economic effects and environ-
mental protection [36]. Environmental deterioration and resource depletion have seriously
weakened the competitive advantages of traditional enterprise clusters. The continuous
strengthening of environmental regulations has also increased the cost of enterprises and
incurred increased transportation costs. In order to deal with industrial waste, enterprises
with symbiotic relationships in the agglomeration area will spontaneously organize them-
selves to establish cleaner production and metabolic chains. By continuously strengthening
the concentration degree of related industries in the cluster area, it can attract a venous
industry cluster of waste management and resource reuse and realize symbiotic benefits
within the cluster relationship. This will also promote the recycling of resources and materi-
Int. J. Environ. Res. Public Health 2022, 19, 16749 6 of 18

als and the green transformation of industry. As a knowledge-intensive industry, producer

services have a certain advantage in that it is easier to form knowledge collisions and
knowledge networks, which helps enterprises break through the shackles of “face-to-face
communication” in traditional agglomeration theory. The spillover effect of sharing labor
force and knowledge information will therefore be more pronounced, which will help
enterprises to form a good innovation environment and business model [37].
Ellison and Glaeser [38] first defined the spatial agglomeration of heterogeneous re-
lated industries as industrial synergy agglomeration. The producer service industry has
the inherent characteristics of high industrial agglomeration, strong professionalism, an
obvious driving effect and high innovation activity, which helps to improve the overall
innovation efficiency of the region, promote the deep integration of the modern service
industry and the traditional manufacturing industry, and promote manufacturing enter-
prises to extend themselves towards both ends of the “smile curve” in the production
process, so as to achieve efficient, clean, and intensive industrial development. Traditional
high-energy-consuming enterprises are forced to do so by market competition, and the
interaction between various service enterprises such as high-pollution control logistics,
finance, and management is strong. The agglomeration of the producer services industry
can provide a one-stop service for the whole process and the entire industry chain for man-
ufacturing enterprises in order to, to a certain extent, reduce the intermediate investment
of the manufacturing industry, improve the resource conversion rate, and realize more
efficient collaborative production [39,40]. Based on the above discussion, hypotheses 3 and
4 are proposed.

Hypothesis 3: The agglomeration of producer services can strengthen the positive relationship
between green tax and the green transformation of industry.

Hypothesis 4: Collaborative agglomeration of manufacturing and producer services can strengthen

the positive relationship between green taxation and industrial green transformation.

4. Research Design
4.1. Variable Description
(1) Core explanatory variable. The core explanatory variable is environmental tax (ET).
Environmental tax is the total of environmental tax, resource tax, and other taxes
related to the environment levied on market entities to promote environmental pro-
tection, rationally develop and utilize natural resources, and maintain ecological
balance [41]. According to the intensity and purpose of taxing environmental protec-
tion, environmental taxes can be divided into broad and narrow statistical dimensions.
The general environmental tax policy was not initially set up to protect the environ-
ment, but it has an environmental protection function. The narrow environmental
tax policy refers to the taxes with obvious pertinence to the environmental function
for environmental protection, such as energy tax, transportation tax, and carbon tax.
Given the short implementation period of China’s environmental protection tax, the
narrow environmental tax cannot meet the requirements of long-term data series
analysis. This study, instead, chooses a generalized environmental tax system based
on the ideas of Deng [42] and Wang [43]. Generally speaking, the taxes that help
prevent pollution and reduce resource waste include consumption tax, resource tax,
urban maintenance and construction tax, vehicle purchase tax, vehicle and vessel tax,
urban land use tax, cultivated land occupation tax, and sewage charges. Due to the
severe lack of data on sewage charges and farmland occupation taxes in the sample
statistics period, they were eliminated in this study.
(2) Control variables. Since there are many external factors affecting industrial green
transformation [44–48], eight external factors are selected as control variables in this
study to minimize the interference of confounding variables on causal effect estimation
and obtain more accurate fitting results. Industry density (ID): measured using the
Int. J. Environ. Res. Public Health 2022, 19, 16749 7 of 18

ratio of the secondary and tertiary industries’ added value to the urban built-up zone
exemption. Economic development level (EDL): measured using real GDP per capita
based on 2004 price levels. Environmental governance (EG): measured using the
amount of investment completed for industrial pollution control. Energy structure
(ES): measured using industrial coal consumption as a proportion of total energy
consumption. Macro-control (MC): measured using the proportion of government
public general budget expenditure to gross national product. Opening degree (OD):
measured by the proportion of the total import and export trade (according to the
domestic destination and source of goods) converted from the average exchange rate
of RMB to USD over the years to the local gross national product. Road accessibility
(RA): measured by road mileage. Population density (PD): measured as the number
of people per square kilometer.
(3) Explained variable. The explained variable is industrial green transformation (IGT).
The concrete manifestation of the green transformation of industry is that industrial
enterprises can produce more financial products by using the same resource elements
as before because of the improvement of management efficiency and technological
innovation and can, simultaneously, reduce environmental pollution. The idea of
investigating the relationship between industrial pollution discharge and economic
output is that environmental pollutants are directly regarded as a negative utility
output, in which the output of “good” products is maximized, and the output of “bad”
products is minimized in the production function. In order to avoid statistical errors
caused by traditional measurement methods as much as possible, this study uses an
SBM (Slack-Based Model) directional distance function combined with the GML index
(Global Malmquist–Luenberger) to measure IGT. This method can deal not only with
“good” outputs, but also with the dynamic continuity of “bad” outputs and input
elements more scientifically. The measurement method of industrial transformation
continues Cobb Douglas’s theory of production function. The average annual labor
force, net fixed assets at the end of the year, industrial water consumption, and total
energy consumption (a standard ton of coal) of enterprises above the designated size
are selected as input variables. The expected output is measured by industrial added
value, while the unexpected output is measured by industrial sulfur dioxide and
industrial wastewater discharge.
(4) Mediating variable. The mechanism variables mainly include credit governance, pro-
fessional agglomeration of producer services, and its co-agglomeration with producer
services and manufacturing.
Credit management (CM). This is measured by the interest expense of high-energy-
consuming industries. Generally speaking, the higher the credit rating of environmental
protection, the easier it is for market participants to obtain credit funds to alleviate the
dilemma of capital flow shortage. Therefore, green credit has the terminal incentive of
credit. Green finance is measured by 1 minus the proportion of interest expenses of six
energy-consuming industries.
The measurement of industrial agglomeration mainly includes primacy index, in-
dustrial concentration, spatial Gini coefficient and location entropy. For the purpose of
research and considering the availability of data, this study uses the location entropy
method to measure the agglomeration degree of producer services. The more employees
in a certain industry in a certain area, the denser the distribution of enterprises in that
industry in that area.

The calculation

process expression of industrial agglomeration is
APS = PS pt /PSt / Ppt /Pt . APS represents the agglomeration of producer services.
PS pt indicates the employment number of producer services in p area in t year. Ppt indi-
cates the total number of people employed in p area in t year. PSt indicates the number of
employed people in the national producer service industry in t year. Pt represents the total
number of national employees in t year. The larger the APS, the higher the concentration of
producer services.
Int. J. Environ. Res. Public Health 2022, 19, 16749 8 of 18

Collaborative Agglomeration (CA). The agglomeration of industries with relevance

and heterogeneity in a certain space has created a situation of collaborative agglomeration.
The calculation process of collaborative agglomeration of manufacturing and producer
services is CA = [1 − | APS − MA|/APS + MA] + ( APS + MA). Among them, MA rep-
resents manufacturing agglomeration.

4.2. Statistical Model

Firstly, the SBM-GML index model is introduced to measure the green transformation
of industry. Consider an economic system with n independent decision-making units
(DMUs), each of which has m production factors xq (q = 1, 2, · · · , m),g kind of expected
outputs yr (r = 1, 2, · · · , g), h kind of unexpected output b f ( f = 1, 2, · · · , h). Then, xqk , yrk ,
and b f k represent input i, expected output r, and undesired output f of DMUk respectively.
In Euclidean space, the input direction
vector and output direction vector are used to set
the projection direction z = z x , zy , zb . The form of the distance function is:
→


D0 = x, y, b; z x , zy , −zb = max ω y + ωz g , b − ωzb ∈ p( x ) (1)

In Equation (1), ω represents the value of distance function. Using linear programming
to solve the direction distance function of the kth DMU in the period t, the following
equation can be obtained:
→
Dkt xkt , ytk , bkt = maxω


(2)
The constraints are:
 n

 ∑k=1 ∑tT=1 λtk xqk t + ωz ≤ x t
x k
 n
∑k=1 ∑tT=1 λtk yrk t − ωz ≥ yt

y k
n T (3)

 ∑ k = 1 ∑ t = 1 λtk btf k − ωzb ≤ bkt

 t
λk ≥ 0, k = 1, 2, · · · , n

λtk stands for weight. Considering the same technology frontier of the global reference,
the GML index of period t to t + 1 is constructed, and the following can be obtained:
 → →
1/2
1 + D ( x t , y t , bt ; y t , − bt ) 1 + D t + 1 ( x t , y t , bt ; y t , − bt )
GMLtt+1 =  → × →
 (4)
1 + D ( x t + 1 , y t + 1 , bt + 1 ; y t + 1 , − bt + 1 ) 1 + D t ( x t + 1 , y t + 1 , bt + 1 ; y t + 1 , − bt + 1 )
x, y, and b represent input factors, desired output, and undesired output, respectively.
Then, we introduce the multiple linear models. In order to verify the statistical
correlation between environmental tax and a green industrial transition, combined with
the theoretical analysis and research hypothesis above, this study constructed the following
multiple linear regression model:

8
IGTit = δ0 + α1 ETit + ∑ γControlijt + µi + νt + ε it (5)
j =1

In Equation (5), δ0 is the intercept term, α1 is the fitting parameter of environmental

tax, i and t represent individual and time, respectively, νt is a time fixed effect, µi is
individual fixed effects, and ε it is the random disturbance term subject to the white noise
process. Control is the information set of control variables, which contains all control
variables. j represents the jth control variable, and γ is the estimated coefficient of the
control variable. In order to investigate the moderating effects of credit governance and
industrial agglomeration on the impact of environmental tax on industrial green transition,
Int. J. Environ. Res. Public Health 2022, 19, 16749 9 of 18

this study incorporated mechanism variables into the model in the form of interaction
terms based on Equation (5). The following three statistical models were obtained:

8
IGTit = δ0 + β 1 ETit + β 2 ETit × CMit + β 3 CMit + ∑ γControlijt + µi + νt + ε it (6)
j =1

8
IGTit = δ0 + ρ1 ETit + ρ2 ETit × APSit + ρ3 APSit + ∑ γControlijt + µi + νt + ε it (7)
j =1

8
IGTit = δ0 + η1 ETit + η2 ETit × CAit + η3 CAit + ∑ γControlijt + µi + νt + ε it (8)
j =1

In Equations (6)–(8), ET × CM, ET × APS, and ET × CA are the interaction terms

between environmental taxes and moderating variables, and the significance and sign
direction of their estimated parameters are the foci of this study.

4.3. Data Source

Due to the severe lack of data for many variables in the Tibet Autonomous Region of
China, we do not consider including Tibet in the statistical sample. At the same time, the
statistical caliber of Hong Kong, Macao, and Taiwan is inconsistent with that of the Chinese
mainland, and we also removed samples from these three regions. Following the principles
of data availability and scientificity, the statistical sample of this study is composed of
the panel data of 30 provinces in China from 2004 to 2020. The original data of relevant
variables mainly come from the China Statistical Yearbook, China Industrial Statistical
Yearbook, China Tax Yearbook, China Environmental Statistical Yearbook, China Economic
Census Yearbook (2018), and the EPS (Express Professional Superior) global statistical data
platform. Some missing values were filled in by linear interpolation. It should be noted
that to reduce the order of magnitude of variables and prevent heteroscedasticity problems,
logarithmic processing was carried out for some explanatory variables with large values as
part of the process of proper calculation. A descriptive statistical analysis of each variable
is provided in Table 1.

Table 1. Variable descriptive statistics.

Variable Standard Minimum Maximum

Variable Mean Value
Symbol Deviation Value Value
Industrial green transformation IGT 1.977 1.223 0.520 7.482
Environmental tax ET 5.721 1.092 1.665 7.765
Economic development level EDL 9.613 0.560 8.346 11.313
Population density PD 7.758 0.576 5.226 8.751
Industry density ID 1.862 0.778 0.401 3.994
Energy structure ES 2.524 2.036 0.030 10.626
Opening degree OD −1.665 0.967 −4.944 0.509
Macro-control MC −1.545 0.419 −2.425 −0.277
Road accessibility RA 13.239 7.716 0.780 39.440
Environmental governance EG −5.749 0.831 −9.368 −3.474
Agglomeration of
APS 1.006 0.333 0.635 2.562
producer services
Credit management CM 0.452 0.142 0.094 0.808
Collaborative agglomeration CA 2.657 0.453 1.739 3.975

5. Empirical Analysis
5.1. Analysis of the Results of Baseline Regression
The commonly used fitting models of the panel data model include the mixed least
squares method, random effects model, and fixed effects model; therefore, the most suitable
Int. J. Environ. Res. Public Health 2022, 19, 16749 10 of 18

method for the sample data in this study needed to be tested further. The results of the
Hausman and F-test show that the null hypothesis was rejected at the 1% level, and the
fixed effects model was considered the most suitable for the sample data in this study. In
order to prevent the negative influence of multicollinearity among variables on the fitting
results, a multicollinearity test was also carried out. The results show that the maximum
variance inflation factor (VIF) is 9.57, the minimum variance inflation factor is 1.28, and the
average variance inflation factor is 4.04. These results show that there is no multicollinearity
problem in the sample data.
Table 2 reports the test results of the impact of ET on IGT. Column (1) reports the
calculation results only including the variable of ET, but not including control variables,
individual fixed effects or time fixed effects. Column (2) reports the calculation results
when adding control variables on the basis of column (1). Column (3) reports the settlement
results of EI influence on IGT after the individual fixed effects are added. Column (4) adds
control variables on the basis of column (3). Column (5) reports the estimated results of
an ET on IGT after adding individual fixed and time-fixed effects. Column (6) shows the
calculation results with all control variables added. The calculation results in column (6)
are discussed as the benchmark regression results, and the ET calculation results reported
in this column are the foci of this study. Considering this study’s use of long-term panel
data, cross-section correlation, sequence correlation, and heteroscedasticity are inevitable.
In this study, the SCC model was used to modify the FE model, as the modified FE model
is more suitable for short panel data [49].

Table 2. Results of benchmark regression.

(1) (2) (3) (4) (5) (6)

Variable
POLS POLS FE FE Two-Way FE Two-Way FE
0.243 *** 0.574 *** 0.645 *** 0.911 *** 1.172 *** 1.238 ***
ET
(5.77) (5.30) (8.95) (5.07) (5.81) (5.17)
−0.017 7.077 *** 6.331 ***
GDP
(−0.10) (6.75) (3.23)
−0.132 * 0.299 *** 0.387 ***
PD
(−1.74) (3.86) (4.14)
−0.347 ** −1.464 *** −1.357 ***
ID
(−2.09) (−6.51) (−4.58)
−0.194 *** −0.253 *** −0.294 ***
ES
(−5.95) (−5.95) (−6.92)
−0.083 −0.097 −0.216 **
OD
(−0.81) (−1.24) (−2.60)
0.820 *** −2.991 *** −2.557 ***
MC
(5.24) (−6.30) (−4.88)
0.031 * 0.043 *** 0.064 ***
RA
(1.91) (6.16) (9.74)
0.018 −0.075 * −0.052
EG
(0.23) (−1.74) (−1.09)
Individual
No No Yes Yes Yes Yes
effects
Time effects No No No No Yes Yes
F 25.03 *** 23.97 *** 80.08 *** 91.37 *** 4.24 *** 242.51 ***
R-square 0.0470 0.3014 0.3758 0.5739 0.4363 0.6032
Hausman test 15.57 *** 94.03 *** 21.49 *** 36.65 ***
Note: ***, **, and * are significant at the 1%, 5%, and 10% levels, respectively. The T statistics are reported
in parentheses.

It can be seen from Table 2 that the calculation results of all models show that the
relevant effects of the ET results on IGT are significantly positive. As such, the more control
variables and fixed effects are added to the model, the greater the correlation coefficient
between ET and IGT will be. The results of two-way FE show that the correlation coefficient
between ET and IGT is 1.238, meaning that it passed the 1% significance test. The results
Int. J. Environ. Res. Public Health 2022, 19, 16749 11 of 18

show that ET can internalize the external negative effects of environmental pollution and
resource consumption. As a result, hypothesis 1 is strongly confirmed. Collecting ET can
reduce pollutant emissions and improve environmental quality by influencing the behavior
of producers and consumers. As far as producers are concerned, the introduction of ET
has increased the tax burden on industrial enterprises, especially those that generate a
large amount of pollution. To eliminate the decrease in profit caused by the increase in
tax burden, enterprises should introduce, research and develop environmental protection
technologies and gradually replace polluting processes and products with clean processes
and green products in order to reduce pollutant emissions. For consumers, it is clear that
the introduction of environmental taxes has raised the price of polluting consumer goods.
Based on the substitution effect, consumers should reduce their purchases of polluting
goods and increase their purchases of environmentally friendly goods. This will increase
the derivative demand for the green transformation of industrial enterprises.

5.2. Robustness Test

The above results preliminarily verify that ET can promote the IGT, but whether this
conclusion is sound remains doubtful. In order to prove the robustness and consistency of
the benchmark regression results, the following aspects must be verified.
The first involves the changing of the measurement method of core explanatory
variables. The vehicle purchase tax evolved from a fee to a tax based on the vehicle
purchase surcharge. This levies taxes on taxable cars and motorcycles purchased by
economic individuals. The purpose of levying a travel tax is for the local government
to raise funds for renovating public roads and waterways within its jurisdiction. The
above two items are included in the broad scope of the ET because although the original
purpose of levying travel tax and vehicle purchase tax is not to protect the environment
and save resources, they objectively inhibit consumers’ willingness to use motor vehicles
and ships. Refined oil is a supplement to vehicles and vessels. Reducing the sales volume
of vehicles and vessels leads to the indirect consumption of oil resources. Considering that
the categories and outputs of new energy vehicles in the market have gradually increased
in recent years, the market share of traditional fuel vehicles is being eroded by new energy
vehicles. As the process becomes more mature due to the growth of factories and the
pressure of market competition increases, major manufacturers will compete to launch
vehicles with higher prices. However, lower purchase prices also decrease the amount of
tax paid by consumers. The combined effect of the two forces limits the protective effect
of travel tax and vehicle purchase tax on resource consumption. In the new calculation
method employed in this study, the income of these two taxes is no longer counted. The
calculation method is changed to the proportion of total government revenue that comprises
environmental tax in order to reduce the amount of information that is changed between
the new variable and the original variable as much as possible.
The second relates to replacing the environmental tax with a more specific ET. In
2006, China issued relevant regulations on the administration of water resource fees, which
to a certain extent, improved the efficiency of industrial water use and promoted the
conservation, protection, management, and rational development and utilization of water
resources. However, the water-saving effect of water resource fees was limited due to the
disadvantages of nonstandard collection standards and weak collection rigidity. In order to
comprehensively promote the resource tax reform, the State Taxation Administration of
The People’s Republic of China announced, in 2016, a pilot project for water resource tax
reform in Hebei Province. The water resource tax adopts the method of changing the water
resource fee into a tax and brings surface water and groundwater into the scope of taxation.
Implementing a quota levy for the high water consumption industry, over-planned water
use, and groundwater overdraft area access to groundwater was also deemed appropriate
in order to raise the tax standard. In 2017, the water resource tax reform pilot area was
expanded to include Beijing, Tianjin, and Inner Mongolia. The water resource tax reform
has increased the water costs for industrial enterprises. It can, therefore, force enterprises
Int. J. Environ. Res. Public Health 2022, 19, 16749 12 of 18

to change their technological processes and innovations and develop in the direction of
circular sustainability. Therefore, this study replaces ET with the water resource tax, taking
the pilot areas of water resource reform announced in 2016 and 2017 as the experimental
group and the remaining areas as the control group. The staggered double difference
method is used for the fitting calculations.
The third involves replacing the statistical model. The first law of geography indicates
that all things are related to their neighbors, and the closer things are, the more related they
are than things that are farther away. When there is a spatial correlation between economic
variables, the traditional econometric methods, such as the mixed least squares method and
fixed effects model, cannot obtain unbiased estimations. In order to estimate formula (1)
more accurately, this study adopts the spatial Durbin model to modify the traditional fixed
effects model. The spatial weight matrix has a great influence on the spatial measurement
model. In order to fully reflect the spatial autocorrelation and spatial heterogeneity of IGT,
this study selects the economic distance of per capita GDP of each province from 2004
to 2020 and the geographical distance calculated by latitude and longitude among the
provincial capitals to form an economic and geographic nested matrix as the weight matrix
of the spatial econometric model.
As can be seen from Table 3, the results of the three testing methods all show that ET
can positively affect the IGT, which verifies the robustness of the benchmark regression
results. Although the significance of the ET estimation coefficient in Method 1 and Method
2 is reduced from 1% of the benchmark regression to 5%, it is still within the acceptable
range and does not pose a threat to the robustness of the results. According to the re-
sults of the benchmark regression, the fitting coefficient of ET will be smaller in a spatial
econometric model with spatial correlation. This confirms the correctness of geo-economic
theory and shows a spatial correlation between regional pollution behavior and industrial
transformation and upgrading.

Table 3. Results of the robustness test.

Variable (1) (2) (3)

0.646 ** 0.168 ** 1.184 ***
ET
(2.68) (2.29) (5.98)
Control variables Yes Yes Yes
Individual effect Yes Yes Yes
Time effect Yes Yes Yes
R-square 0.6214 0.6060 0.6109
Note: *** and ** are significant at the 1% and 5% levels, respectively. T statistics are reported in parentheses in
columns (1)(2). The z statistics are reported in column (3).

5.3. Endogenous Problem

This study selects more control variables to reduce the negative impact caused by
important missing variables. The two-way fixed effects model allows regional effects to be
related to explanatory variables, which can overcome the endogenous problems caused by
missing variables to some extent. However, the unbiased estimation result of the model is
also threatened by the endogenous causal relationship between the variables. ET is a tax
system for environmental pollution and resource consumption that is closely related to the
clean technologies used by industrial enterprises. Intuitively, the governments of the big
firms that emit large amounts of environmental pollution may adopt stricter environmental
control policies, urging firms to make greener changes with higher tax rates. In the case
of less industrial pollution and low resource consumption, the regulatory authorities will
be more lenient on industrial enterprises, and the corresponding ET rates may be lower
for those regions dominated by technology-intensive manufacturing enterprises. In order
to strengthen the causal logic of ET to promote IGT, this study chooses the instrumental
variable method to verify the results. Concerning the problem of instrument variables
(IV), mainly referring to the idea of Batick, a Batick instrument variable is constructed
Int. J. Environ. Res. Public Health 2022, 19, 16749 13 of 18

interactively by using the first-order lag term and the first-order difference term of ET [50].
At the same time, to prevent the problem of weak instrumental variables, the second-order
lag term of the ET is selected as the second instrumental variable. As can be seen from
Table 4, the results of the first stage of the two-stage least square method (2SLS) show that
the impact of the two instrument variables on the ET is significantly positive, indicating
that the instrument variables we selected meet the relevance principle. At the same time,
the F statistic of the weak identification test is 308.14, which is greater than 19.93 of the
10% critical value. It is considered that there is no weak instrument variable problem.
The P value of the underidentification test strongly rejects the original assumption that
the tool variable is not identifiable. The P value of the sargan test does not reject the
original assumption that there is no over-identification. The results of the second stage of
2SLS show that the estimation coefficient of the ET is 1.341, meaning that it passed the 1%
significance test. The results show that the promotion effect of an ET on IGT is still valid
after overcoming endogenous problems.

Table 4. Endogenous test results.

Variable 2SLS: First Stage 2SLS: Second Stage Plausibly IV

1.341 *** 1.530 **
ET
(4.91) (2.03)
0.151 ***
IV 1
(16.52)
0.641 *** 0.089 **
IV 2
(21.55) (2.20)
Weak identification test 308.14
Underidentification test 255.70 ***
Sargan statistic 0.3442
Control variables Yes Yes Yes
Individual effect Yes Yes Yes
Time effect Yes Yes Yes
R-square 0.9877 0.5545
Note: *** and ** are significant at the 1% and 5% levels, respectively.

Because it is challenging to find a strictly exclusive tool variable in economics, the

exogenous nature of the tool variable is always questioned. As such, it is worth relaxing the
strict exogenous constraint on the tool variables and regarding them as slightly endogenous
variables, and then using the approximate exogenous tool variable method proposed by
Conley et al. [51] to re-fit the calculation. Because the model is only allowed to be used
in precisely identified cases, and the time lag term is not allowed to be used as the tool
variable, only the Batick tool variable is used for calculation here. From the approximate
exogenous IV results in Table 4, it can be seen that the estimation coefficient of ET on IGT
is 1.530, meaning that it passed the 5% significance test, which proves that the estimation
result of 2SLS is reliable.

5.4. Test of Influence Mechanism

In order to verify research hypotheses 2 to 4, the econometric models constructed by
formulas (6) to (8) are combined, and the results in Table 5 are obtained using the two-way
FE model.
Int. J. Environ. Res. Public Health 2022, 19, 16749 14 of 18

Table 5. The results of the mechanism test.

Variable (1) (2) (3)

1.298 *** 1.266 *** 1.232 ***
ET
(5.54) (5.70) (5.45)
0.479 ***
CM
(2.86)
1.902 **
APS
(2.37)
0.358 **
CA
(2.11)
1.392 ***
ET × CM
(3.93)
0.059 **
ET × APS
(2.48)
0.094 *
ET × CA
(1.88)
Control variables Yes Yes Yes
Individual effect Yes Yes Yes
Time effect Yes Yes Yes
R-square 0.6224 0.6095 0.6112
Note: ***, **, and * are significant at the 1%, 5%, and 10% levels, respectively. The T statistics are reported
in parentheses.

As can be seen from Table 5, the estimation coefficient of ET on IGT is always sig-
nificantly positive. The interaction between CM and ET has an estimation coefficient of
1.392 for IGT, meaning that it passed the 1% significance test. In addition, the estima-
tion coefficient of the interaction between APS and ET is 0.059, meaning that it passed
the 5% significance test. Moreover, the estimated interaction coefficient between CA and
ET is 0.094, which passed the 10% significance test. The estimation coefficients of the
three interactive terms are all positive. Combined with the testing process of regulatory
effects, the conclusion can be drawn that the above three channels positively strengthen
the positive correlation between ET and IGT, and research hypotheses 2 to 4 are verified.
Discipline for breaking one’s promise, credit policy, knowledge spillovers, and scale effects
are essential mechanisms to regulate ET and promote the green transformation of industry.
By comparing the coefficients of interaction terms, found that the estimation coefficient of
interaction terms of CM is significantly more significant than the other two mechanism
variables. The results show that credit management measures, such as credit control and
environmental blacklisting, have a more significant impact on industrial enterprises and
can promote the green transformation of industry.

6. Conclusions
As an essential tool for environmental governance, taxation is essential in promoting
ecological civilization and is a green transformation process [52]. In this study, using a
two-way fixed effects model, we investigated the multiple impact mechanisms of ET on IGT
based on panel data for 30 Chinese provinces from 2004 to 2020. We found that ET in the
form of price guidance on green innovation and cleaner production is released to firms as a
clear signal that can significantly contribute to the green transformation of industry. Our
findings remain after a series of robustness tests and after dealing with endogeneity issues.
The results of the mechanism test indicate that CM, APS, and CA are essential mechanisms
to enhance ET for the green transformation of industry. According to the empirical results
of the mechanism path, CM plays the highest positive regulatory role in environmental tax
affecting industrial green transformation. It is very effective to use green financial and credit
policies and taxation policies to promote environmental protection. Cutting-edge knowl-
edge and advanced technology are important driving forces for improving production
efficiency and green development. APS tends to form specialized intermediate products
and service markets, providing specialized cleaner production and pollution reduction
Int. J. Environ. Res. Public Health 2022, 19, 16749 15 of 18

solutions for manufacturing enterprises. At the same time, specialization agglomeration

reduces transaction costs, which is beneficial to the communication and cooperation within
and between productive service enterprises and promotes the deepening of specialization
and green transformation of industrial enterprises. CA can enhance economies of scale,
reduce energy consumption per unit output through increasing returns to scale, promote
the centralized consumption of resources and the centralized treatment of pollutants, build
a circular economic system, and improve the efficiency of resource allocation and the green
development level of the manufacturing industry. Relevant measures for environmental
protection reinforce the innovation compensation effect of green tax and stimulate indus-
trial enterprises to optimize production processes and increase green investments. We
found that methods such as green standards, pollutant emission standards, permit systems,
sewage charges, and ET can all play a positive role in a system of measures to promote
green industrial development. Only the scope of application and the policy effects of differ-
ent measures differ. An environmental protection tax would not completely solve all the
problems involving the green transformation of industry, but specific areas of application
and limitations of intervention effects do exist.
This paper argues that in promoting green industrial development, ET mainly applies
to areas that can be regulated by taxation, such as energy consumption, pollutant emissions,
and green consumption taxes. By internalizing resources, taxation corrects the external
diseconomies of pollutant emission behavior and incentivizes companies to increase green
total factor productivity. It positively promotes the application of environmental technology
research and development, the promotion of new energy sources, and the development of
clean industries with the help of market regulation.
In order to better encourage environmental taxation to promote IGT, based on the theo-
retical and empirical results, this paper puts forward the following recommendations: First,
improve the clean energy taxation support system. At the legal level, it is recommended
to improve the environmental protection tax system based on environmental and energy
taxes and to revise and improve the Environmental Protection Tax Law. At the policy level,
the scope of environmental protection tax coverage should be further expanded, and the
tax rate and levy scope should be adjusted in due course. Second, optimize the industrial
layout. According to the main functional area planning requirements, regional resource and
environmental carrying capacity, industrial development for classification guidance, clear
industrial development direction, development intensity, the construction of outstanding
characteristics, dislocation development, and complementary and mutual progress should
represent the new patterns of industrial development. Third, strengthen the leading role
of credit. The interconnection of information between banks, financial institutions, and
environmental departments should be strengthened, and comprehensive research should
be conducted, with judgments made on the contributions of enterprises to environmental
protection and social responsibility with the help of professional third-party environmental
risk evaluation agencies.
This study explores the impact of an environmental tax on industrial green trans-
formation from both theoretical and empirical perspectives, enriching the research on
market-based environmental regulatory instruments and externalities and the research
framework of its effects on green development. In addition, empirical analyses of a series
of econometric models can effectively identify the role of an environmental tax in China’s
industrial green development in order to provide a reference for the implementation of
China’s industrial green development strategy and the rational development of an en-
vironmental tax system. However, there are still some limitations. First, due to the late
implementation of the environmental tax policy in China, the original intention of setting
the environmental tax variable used in this study is not directly to protect the environment,
but to take into account the function of environmental protection in the implementation
process. Future research should use specific taxes, such as water resources and environmen-
tal taxes, to make policy assessments regarding how they affect the green transformation
of industry. Secondly, the policy game between different administrative regions and the
Int. J. Environ. Res. Public Health 2022, 19, 16749 16 of 18

degree of economic ties should be considered. Studying the impact of environmental

taxes on green industrial development from a spatial perspective may have more policy
implications. Third, we used a province-level panel dataset because of the unavailability
of city-level data. Finally, it is worth pointing out that this study attempted to provide
new evidence on the impact of an environmental tax on green industrial transformation,
while measuring IGT represents a challenging issue. Due to data availability, we employed
industrial green total factor productivity as a proxy of green industrial transformation,
which has some potential limitations. Future research will aim to find ways in which to
better measure green industrial transformation. Of course, the limitations do not cast doubt
on the results of this study, but they should be addressed in future studies.

Author Contributions: Project administration, X.Z.; writing—original draft, Y.S. All authors have
read and agreed to the published version of the manuscript.
Funding: This work was financially supported by the Natural Science Foundation of Fujian Province
(grant number: 2022J01320) and the Supported by the Fundamental Research Funds for the Central
Universities in Huaqiao University.
Institutional Review Board Statement: Not applicable.
Informed Consent Statement: Not applicable.
Data Availability Statement: All of the data are publicly available, and proper sources are cited in
the text.
Conflicts of Interest: The authors declare no conflict of interest.

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