Research on the Impact of Climate Policy Uncertainty on Corporate Green Technology Innovation

Abstract

Faced with growing climate change, government policies aimed at fixing market failures have also created significant regulatory and economic uncertainty. This uncertainty influences corporate strategic decisions. Green technological innovation has become a key ability for firms to adapt and compete in a global environment that values sustainability. This study examines how climate policy uncertainty affects corporate green technological innovation. It uses Prospect Theory , Information Asymmetry Theory and data from China’s A-share listed companies between 2013 and 2023. The main explanatory variable, climate policy uncertainty, is built by multiplying a city-level index—based on analyzing mainstream newspaper reports with a deep learning algorithm—by how often green transition keywords appear in firms’ annual reports. The dependent variable, green technological innovation, is measured as the logarithm of a firm’s total yearly green patent applications plus one. The analysis uses a two-way fixed effects model. To address endogeneity, an instrumental variable approach is applied. We use the mayor's remaining years in office and the interaction between the city-level climate physical risk index and industry energy intensity as the instrument for climate policy uncertainty.A mediation model tests two mechanisms: managerial foresight, measured by keyword frequency in annual reports, and analyst coverage, sourced from the CSMAR database. Regional differences are also examined. The results show that: (1) climate policy uncertainty significantly promotes corporate green innovation, with an economic effect of approximately 3.4%. This finding holds across various robustness checks; (2) the positive effect operates through two pathways—stimulating managerial foresight and mitigating information asymmetry; and (3) the effect is stronger for firms in non‑eastern regions of China.