Actions according with words? Environmental regulation and pollutant emissions

The construction of a scientific and efficient ecological and environmental governance mechanism is a key pathway to achieving the coordinated unity of economic growth and sustainable development. Using the pollutant emission permit policy as a quasi-natural experiment, this study systematically evaluates the impact of market-based environmental regulation on pollutant emissions. The results show that market-based regulation significantly reduces pollutant emissions, reflecting an individual effect. At the same time, by raising environmental thresholds, it accelerates the exit of low-productivity firms and thereby compels firms to pursue green transformation, reflecting a market allocation effect. In addition, market-based regulation strengthens information disclosure, reduces adverse selection risks, and helps firms gain greater access to credit, while their competitiveness in non-green sectors remains unaffected. Further analysis indicates that market-based environmental regulation effectively promotes substantive green transformation, whereas government-led regulation tends to trigger greenwashing behaviors and encourages firms to relocate to regions with lower environmental costs. At the policy level, different types of regulation are complementary, with government-led measures delivering rapid results in situations of severe pollution, while market-based regulation fosters long-term, stable emission reductions and green transformation through incentives for green innovation and optimized capital allocation.