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Actions according with words? Environmental regulation and pollutant emissions

Author

Listed:
  • Bai, Yun
  • Zhang, Xin’ai
  • Wang, Siyun
  • Ma, Minghui

Abstract

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.

Suggested Citation

  • Bai, Yun & Zhang, Xin’ai & Wang, Siyun & Ma, Minghui, 2026. "Actions according with words? Environmental regulation and pollutant emissions," Economic Analysis and Policy, Elsevier, vol. 89(C), pages 459-471.
    • Handle: RePEc:eee:ecanpo:v:89:y:2026:i:c:p:459-471
    DOI: 10.1016/j.eap.2025.12.022
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    References listed on IDEAS

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