Is place-based supportive policy necessary to reduce corporate emissions? Firm-level evidence from China

Although a considerable body of research has documented the effects of environmental regulation, spatially differentiated sustainability pressures in China call for diversified environmental governance policies. Based on the Sustainable Development Policy for Resource-based Cities (SDPRC) implemented in 2007, we adopt a staggered difference-in-differences approach using firm-level data to investigate the microeffects and mechanisms of place-based supportive policy on corporate emissions. We find strong and robust evidence that the SDPRC has significantly reduced corporate emissions. Mechanism tests show that the SDPRC curbed corporate emissions through long-term mechanisms such as increasing environmental governance investment and advancing green technologies, rather than through short-term compliance by reducing production capacity. Heterogeneity tests show that the SDPRC's environmental governance effect is more pronounced for firms in regions with higher fiscal pressure, firms in regions with higher environmental regulation, large firms, and firms with lower financing constraints. As a supportive policy, we find the SDPRC to be complementary to environmental regulation. This study provides empirical evidence with policy implications for diversifying environmental policies and incorporating regional heterogeneity into the policymaking process of environmental governance.