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Can green credit policy restrict the cross-region investment of heavy-polluting enterprises? Evidence from China

Author

Listed:
  • Lei Ai

    (Southeast University, Jiulong Lake Campus)

  • Fengying Wang

    (Nanchang Institute of Science and Technology)

  • Lei Tan

    (Southeast University, Jiulong Lake Campus)

Abstract

To curb the escalating environmental degradation, China implemented the green credit policy (GCP) in 2012, aiming to restrict credit to heavily polluting industries and promote the development of green enterprises. However, cross-region investments by polluting firms could enable "pollution transfer" between regions, limiting GCP's effectiveness. This study examines whether GCP could reduce cross-region investments by heavily polluting listed firms from 2009 to 2019. Using a difference-in-differences model, the results show that GCP significantly reduced polluting firms' cross-region investments, indicating GCP limited pollution transfer. Robustness checks confirm this finding. In addition, GCP primarily reduced long-term loans and government subsidies for polluting firms, curbing their cross-region expansion. This study can provide valuable insights for emerging economies seeking to limit pollution transfer and restrain polluting industries.

Suggested Citation

  • Lei Ai & Fengying Wang & Lei Tan, 2025. "Can green credit policy restrict the cross-region investment of heavy-polluting enterprises? Evidence from China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(2), pages 3873-3897, February.
    • Handle: RePEc:spr:endesu:v:27:y:2025:i:2:d:10.1007_s10668-023-04045-8
    DOI: 10.1007/s10668-023-04045-8
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