China has steadily expanded the scale of government subsidies to firms, raising the need for a clear evaluation of their environmental regulatory effects in the context of high-quality growth and economic restructuring. Using the National Tax Survey Database (NTSD), this study investigates the relationship between subsidies and corporate carbon emissions. The analysis identifies a significant inverted U-shaped relationship between the two. Mechanism tests reveal that fixed asset investment is a critical channel: subsidies drive substantial expansion of fixed assets, and the growth rate of these assets also exhibits an inverted U-shaped association with emissions. The heterogeneity analysis shows that this pattern is more pronounced in wholly state-owned enterprises and firms with weaker financial conditions, where subsidies exert a stronger effect in reducing emissions. In addition, greater administrative spending weakens the carbon-reduction benefits of subsidies. These findings provide new empirical evidence on the environmental effects of government subsidies and offer practical references for refining financial supervision systems.
Chen et al. (Thu,) studied this question.