How does environmental disclosure impede regional carbon emissions? Insights from extensive and intensive margins

Abstract

This paper examines the causal effect of environmental information disclosure (EID) on regional carbon emissions through the lens of extensive and intensive margins of industrial development. We find that, on average, EID reduces regional carbon emissions by 5.4 % in treated cities relative to the control group following the launch of the Pollution Information Transparency Index (PITI). We then decompose regional carbon emissions into those of new industrial entrants (i.e., the extensive margin) and incumbent industrial firms (i.e., the intensive margin). We find that EID not only deters the entry of industrial firms but also inhibits the entry of manufacturing and carbon-intensive firms. At the intensive margin, we find that EID reduces corporate carbon emissions mainly through cutting industrial output rather than improving energy efficiency. Further analyses indicate that the mitigation effect on carbon emissions is much more prevalent in regions with stringent enforcement, strong legal environments, and high Internet penetration rates. This study highlights the importance of informal regulation in mitigating climate change.