Abstract: As a market-based environmental regulation tool, the effectiveness of environmental protection tax in promoting green competitiveness relies on market mechanisms. This study examined the heterogeneous effects of environmental protection tax on regional green competitiveness in the context of market integration. The results indicated that: (1) Threshold regression analysis revealed that the impact of environmental protection tax on regional green competitiveness depended on the level of local market development. When the market integration process reached a certain stage, environmental protection tax had a greater promoting effect on green competitiveness. However, as the market reached a highly integrated stage, the promoting effect of environmental protection tax diminished. (2) Mediation analysis showed that industrial structure upgrading played a significant mediating role between environmental protection tax and green competitiveness, while the factor of market development had a masking effect on the impact of environmental protection tax. (3) Further spatial econometric tests revealed that both environmental protection tax and market integration had significant effects on enhancing regional green competitiveness and generating positive spatial spillover effects, however, they exhibited a certain degree of substitutability. Finally, in order to maximize the enhancement effect of environmental protection tax on green competitiveness, policy recommendations were proposed towards an imporved coordination and reasonability of environmental protection tax policies.