Does China's Environmental Protection Tax Improve Corporate ESG Performance? Causal Inference Based on Double Machine Learning

Abstract

The environmental protection tax (EPT), a market-based environmental control mechanism, is essential for enhancing the environmental, social, and governance (ESG) performance of corporations. Using a Double Machine Learning (DML) model, this study empirically investigates the impact of EPT on corporate ESG performance using panel data of the Chinese A-share listed companies from 2012 to 2023. The results illustrate that the EPT improves corporate ESG performance. Furthermore, supplementary robustness tests provide confirmation of the incentive impact. Corporate ESG performance can be enhanced by the EPT through two distinct mechanisms: motivating green technological innovation and increasing green total factor productivity. Heterogeneity analysis demonstrates that the effect of the EPT in promoting corporate ESG performance is more evident in non-state-owned firms, eastern and central regions, and firms with a high proportion of institutional investors. The results of this study have some policy implications for environmental protection that might be educational for many developing nations throughout the world.

Received: 17 February 2025 | Revised: 30 July 2025 | Accepted: 30 October 2025

Conflicts of Interest

The authors declare that they have no conflicts of interest to this work.

Data Availability Statement

Data are available from the corresponding author upon reasonable request.

Author Contribution Statement

Yuqiang Gao: Conceptualization, Validation, Project administration, Funding acquisition. Shengchang Jiao: Conceptualization, Methodology, Software, Investigation, Writing – original draft. Kaihua Wang: Formal analysis, Writing – review & editing. Di Yuan: Validation, Writing – review & editing, Project administration. Malin Song: Supervision. Mengzi Wang: Writing – review & editing.