Environmental Policy Stringency, Low-Carbon Innovation, and GVC Functional Specialization: The Moderating Roles of National Innovation Systems and Entrepreneurship

This study investigates the impact of Environmental Policy Stringency (EPS) on GVC functional specialization. We find that EPS promotes high value-added, low-carbon upstream and downstream specialization—supporting the “Porter Hypothesis (PH)”—while simultaneously driving carbon-intensive production to regions with lax regulations, validating the “Pollution Haven Hypothesis (PHH)”. These findings demonstrate that both effects coexist across distinct GVC stages. Heterogeneity analysis reveals that the impacts of EPS vary across policy instruments: market-based instruments primarily promote upstream functional specialization, whereas non-market instruments exert stronger effects on downstream functional specialization. In terms of temporal dynamics, the Paris Agreement intensified the PHH in production activities while catalyzing medium-to-long-term incentives for upstream and downstream specialization. The influence of EPS on GVC structural adjustments has strengthened notably since the Paris Agreement, reflecting a significant temporal lag and long-term efficacy. Mechanistically, low-carbon innovation serves as the primary channel for functional upgrading, an effect significantly amplified by robust national innovation systems (NIS) and entrepreneurship. Meanwhile, NIS and entrepreneurship partly amplify the positive effect of EPS on high-end functional specialization. From a GVC functional perspective, this study offers new evidence reconciling the PH and the PHH.