1. Introduction

Recently, global climate change has caused a series of environmental problems such as global warming, extreme weather, glacier melting, and sea level rise, which seriously threaten the sustainable development of human society. Green innovation can achieve sustainable development by enhancing energy efficiency, reducing carbon emissions, and developing new technologies, and is increasingly becoming an important means to combat climate change. Meanwhile, to address climate change and achieve “dual carbon” goals, the Chinese government launched the Pilot Low Carbon Cities (PLCC) policy in 2010. The pilot cities have introduced low-carbon city development plans based on their industrial structure, resource endowment, and technological advantages, and most of these plans emphasize improving green innovation is an effective path to sustainable development of low-carbon cities. The PLCC policy means that we can achieve low carbon development in cities by improving energy efficiency, optimizing energy structure, eliminating high carbon industries, and adopting more environmentally friendly resources, and green innovation is an important driver to achieve this development model. The high priority given to the PLCC policy at the national level and the gradual expansion of the coverage of the pilot project demonstrate the importance of this pilot policy in promoting green development in China. The purpose of this paper is to explore the impact of the implementation of the PLCC policy on green innovation in Chinese cities.

The literature on environmental policy, green innovation, and PLCC is reviewed in this paper. The “Porter Hypothesis” typically serves as the foundation for literature on the effects of environmental regulation on technological innovation and productivity. For testing the weak “Porter Hypothesis”, scholars have discovered that more stringent environmental regulations force enterprises to spend more on R&D [1,2,3]. However, R&D spending is more an input to production processes, which do not immediately disclose innovation outputs, and R&D investment does not clarify the type of innovation as green innovation has a path-dependent influence. As a result, academics have begun to quantify local green innovation using more specialized and microscopic patent data [4,5,6]. The focus of studies on the potential influence of environmental policies on green innovation has likewise steadily migrated from the provincial to the urban level. Zhang et al. [7] investigated the impact of three environmental rules on green innovation and discovered that market-based and voluntary regulations are more effective in promoting green innovation than command-and-control environmental regulations. Based on data from patent applications filed by publicly traded firms, Cui et al. [8] evaluated the innovation impact of China’s pilot carbon emissions trading strategy and found that the policy promoted firm-level low-carbon technology innovation. To some extent, this reveals the micro-mechanics of city-level product switching in the face of environmental policies, i.e., cities may devote more resources to cleaner products while abandoning pollution-intensive productions. Tests of the strong “Porter hypothesis” are richer, but the findings are not consistent across the literature due to different measures of environmental regulation and differences in the samples selected. Some studies have found that environmental policy can promote productivity in specific industries [9,10]. Some academics have come to the contrary conclusion [11,12]. Other studies have also shown that environmental regulations might not always correlate directly with urban green productivity [13,14,15].Research on low-carbon cities has been divided into two main directions. Some scholars believe that the implementation of PLCC policies can effectively promote urban pollution reduction and green development [16]. Based on data from 271 cities in China, Yan et al. [17] demonstrated that the implementation of PLCC policies effectively reduces haze pollution in China and that PLCC policies have spatial spillover effects. Cheng et al. [18] examined the effects of PLCC on green GDP at the city level using the difference-in-difference (DID) model and found that PLCC has an economy of scale effect and regional differences. The DID method was also used by Song et al. [19] to evaluate the impact of PLCC policy on urban ecological efficiency. He proposed that the PLCC could have significantly improved urban ecological efficiency and that the main intermediary mechanisms were technological innovation, industrial structure advancement, and energy utilization efficiency. This demonstrates that the PLCC’s implementation has some sort of promotional impact on urban green development. Another part of the study shows that the implementation of PLCC policy is not significant and even has the opposite effect. Fu et al. [20] believe that the PLCC policy’s influence on carbon reduction is not always immediate and that policy effects are more effective in the eastern region than the western region. Chen et al. [21] examined the impact of PLCC policy on urban carbon emissions from a spatial economics perspective and the empirical results showed that PLCC policies have a siphon effect and increase the carbon intensity of neighboring regions.

The above studies analyzed and discussed the PLCC policy from different perspectives; however, there are still limitations in the following aspects. First, although there is a rich literature to test the “Porter hypothesis,” early studies typically gauge a city’s investment in pollution control as a measure of environmental regulation intensity, and the more recent studies mainly examine a single environmental policy, rather than a comprehensive climate policy such as the PLCC. Second, although some literature has evaluated the effectiveness of pilot policies for PLCC using traditional policy evaluation methods, the selected assessment criteria have mostly focused on energy and carbon emission-related indicators, such as energy consumption, energy intensity, carbon emissions, and carbon intensity. Third, although the above indicators are direct manifestations of PLCC, existing studies have not explored how PLCC policy affects urban green innovation and have not captured their specific mechanisms from internal and external perspectives. Finally, despite the fact that previous research has mostly examined how PLCC regulations affect urban green innovation and how they work, few articles have been able to precisely portray the persistence of PLCC policy effects over time and their scope in space. The above research gaps will be the focus of this paper.

In response to the shortcomings of the prior literature, the key marginal contributions of this paper are as follows: (1) A useful addition to the literature on the implementation effect of this policy, this paper analyzes the policy effects of the PLCC from the perspective of urban green innovation. It offers a quantitative scientific basis for the evaluation of this comprehensive environmental policy. (2) After examining whether there is a policy effect of the PLCC program, the spatial and temporal heterogeneity of the policy effect is also examined, so that we can capture the duration and effective space of the policy effect more precisely. (3) We analyze and verify the impact mechanisms of the PLCC program on urban green innovation from two perspectives: environmental regulation intensity and alleviation of financing constraints.

The rest of the sections of this paper are organized as follows: The relevant literature is reviewed and research hypotheses are proposed in Section 2. Section 3 presents the construction of empirical models and data resources. Section 4 shows the empirical results and relevant analysis. Section 5 conducts the intermediary mechanism test. According to the analysis above, the research conclusions are drawn in Section 6, and some recommendations are also given based on these conclusions. 6. Conclusions and Recommendations

Based on the panel data of 285 Chinese cities from 2005 to 2020, this paper estimated the promoting effect of the PLCC policy on regional green innovation using the DID method and obtained the following four main conclusions: (1) The implementation of the PLCC policy significantly promotes green innovation, increasing the number of green patent applications in the pilot cities by about 0.1613% per year. (2) In terms of the temporal dimension, the impact of the PLCC policy on regional green innovation is characterized as an inverted “U”-shaped change in time, and the promoting effect is significant for seven years after its establishment and starts to decline in the eighth year. (3) From the spatial dimension, there is a significant spatial spillover effect of the PLCC policy on green innovation, and the indirect effect is larger than the direct effect. The spatial spillover effect ranges within 200 km of the pilot city and gradually decreases as the distance increases. (4) The PLCC policy can promote regional green innovation by enhancing environmental regulations and alleviating financing constraints. Based on the above findings, this paper puts forward corresponding recommendations.

Firstly, given that the PLCC policy may support urban green innovation and spread green technology advancement in the neighborhood, which indicates the implementation of the PLCC is currently a feasible option for China’s regional environmental policies. Therefore, policy makers can further promote the PLCC policy nationwide by refining pilot experiences and developing typical cases, contributing to the goals of “carbon peak” by 2030 and “carbon neutrality” by 2060 at the city level. In view of the weak constraints of the pilot policy, in order to fully encourage businesses to innovate in green technology and to achieve a win-win situation of low-carbon emission reduction and economic development through green technological progress, the government should effectively supervise and guide the pilot cities during the implementation of the pilot program.

Secondly, given that the policy effects of the PLCC policy are only effective for seven years, the policy effects of the PLCC should be strictly implemented based on the continuous maintenance of the sustainability of low-carbon pilot policy in relation to environmental regulation and enterprise financing to prolong the duration of the policy effects of low-carbon city pilot projects. Given that the spatial spillover effect of low-carbon city pilot policies is effective within 200 km and the spatial distribution of the existing low-carbon city pilots is still uneven, we suggest that the central government should give priority to supporting Zhengzhou, the central city of the Central Plains Economic Zone, and Heilongjiang and Changchun, the core cities of the northeast heavy industrial zone, to declare low-carbon city pilot policies. In order to foster high-quality urban development while realizing shared progress in green technology, the regional government should encourage intra-regional collaboration in green technology innovation. In particular, it should encourage peer-to-peer technology cooperation between cities with higher levels of green production.

Finally, we should value the intermediate function that environmental legislation and green financing play in the development of green technology advancement. When encouraging businesses to boost their investment in green R&D, it is essential to utilize the synergistic innovation function of various policy tools in environmental regulation. In the process of implementing pilot policies for low-carbon cities, on the one hand, policies should be designed in a targeted manner for the role subjects of different policy tools; on the other hand, the synergistic use of several policy tools should be advocated so that the effects of various policy measures on green technology innovation can be fully realized. In terms of green finance, the government should optimize and improve urban green credit financial policies to alleviate enterprise and other innovative subjects’ financing constraints. (1) The local government should establish specific funds for low-carbon development, build varied and sustainable green credit guarantee mechanisms, and innovate green low-carbon investment and financing modes. (2) Green finance should be increased to invest in low-carbon technology research and development, while financial subsidies, tax concessions, and social donations should be used to ease the financing constraints of enterprises and other innovative subjects. (3) Green credit funds ought to encourage the growth of low-carbon enterprises, especially in industries, scientific research institutions, and enterprises that tackle low-carbon core technologies, in order to accelerate the development of low-carbon core technologies and thus enhance urban green technology innovation.