Trade policy uncertainty and firm-level pollution emissions: Evidence from China's accession to the WTO

Abstract

This study examines how trade policy uncertainty (TPU) affects firms’ pollution emissions. The result shows that, first, the TPU reduction significantly reduces firm-level pollution emissions which robustness checks corroborate; second, the negative effects are realized through the export effect and innovation effect. On the one hand, the TPU reduction encourages firms’ export value and quality, which enables firms to switch to cleaner production patterns. On the other hand, it also stimulates firms’ innovation, allowing them to increase energy efficiency. The heterogeneity analysis reveals that the effects are greater for state-owned firms, firms with high environmental consciousness, and firms in more polluting industries.