The Industrial Transformation Effects and Economic Trade-Offs of Green Tax Incentives in China

Liu Jiaqi, Wang Xin

Guangzhou Xinhua University

Abstract：

Green tax incentives are an important policy instrument for promoting the green transformation of industry and sustainable economic development. Drawing on externality theory and sustainable development theory, this paper examines the theoretical foundations of how green tax incentives affect industrial transformation and discusses their effects in terms of firms' production costs, green technological innovation, and industrial restructuring. The analysis suggests that green tax incentives can adjust firms' cost burdens and investment choices, encouraging them to reduce pollution emissions, improve resource-use efficiency, and move industry toward greener and lower-carbon development. However, firms differ in their financial resources and capacity to transform, and tax policies may also increase short-term operating pressure for some firms. Green tax incentive policies should therefore be improved in a balanced manner, taking environmental protection, business competitiveness, and industrial development into account, so as to further promote the green transformation of industry.

Key Words：

green tax incentives; industrial transformation; green innovation