Low-carbon city pilot policy and corporate environmental violations: Evidence from heavily polluting firms in China

Abstract

This study examines the impact of China's Low-Carbon City Pilot Policy (LCCPP) on heavily polluting firms’ environmental violations. Using a staggered difference-in-differences (DID) model, we find that LCCPP significantly reduces heavily polluting firms’ environmental violations. Mechanism tests indicate that this reduction is driven by strengthening government green attention, increasing environmental subsidy, and environmental investment. Heterogeneity studies reveal that the policy's effects are more pronounced in state-owned enterprises, firms in less competitive industries, and firms with lower levels of management shareholding. Our research provides theoretical and empirical support for the ongoing expansion of LCCPP, highlighting its positive effects on environmental governance.