Green innovation drives the realization of carbon neutrality and the weak Porter effect

Abstract

Achieving carbon neutrality involves complex economic, social, and environmental systems. At first, this paper categorizes goods into ordinary, low-carbon, and zero-carbon goods based on extended carbon footprint labels. Second, based on the green Schumpeterian endogenous growth model, it establishes an economic dynamical system by modeling the production of different goods to explore the effects of four key points for emission reduction – carbon tax, green values dissemination rate, new energy extraction capacity, and carbon emission control rate – on the evolution of the three core elements of carbon neutrality: green innovation, energy structure, and green consumption preferences. Finally, it explores the pathways to achieving carbon neutrality and economic growth. The findings highlight two points. Firstly, there exists a pathway to achieve carbon neutrality while maintaining economic growth. Green innovation is the foundation for carbon neutrality, and its combination with higher carbon tax and faster dissemination of green values creates dominant role in achieving carbon neutrality and producing resultant force in reducing both carbon emission and carbon intensity. Meanwhile, enhancing both new energy extraction capacity and carbon emission control rates (as part of the combination of emission reduction points) are effective supplementary approach to attaining carbon neutrality. Lowering the discount rate facilitates achieving carbon neutrality while maintaining economic growth. Finally, the relationship between optimal carbon tax and green innovation exhibits a weak Porter effect, i.e., an inverted U-shaped relationship between these two elements, and the incentive effect of carbon tax on green innovation gradually weakens as green innovation advances.