Greening through trade

doi:10.1016/j.jcorpfin.2025.102906

Greening through trade

2025-10-10

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DOI：10.1016/j.jcorpfin.2025.102906

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We examine the impact of environmental regulations in export destinations on firms’ pollution emissions. Leveraging the passage of Permanent Normal Trade Relations (PNTR) by the United States—which eliminated tariff policy uncertainty for Chinese exports—we provide evidence that 1% increase of exports to highly regulated markets reduces smoke, SO 2, and waste gas emissions by 0.267%, 0.239%, and 0.026%, and water and coal usage by 0.185% and 0.242%, respectively. Our mechanism analysis reveals that firms adapt their environmental practices to comply with foreign regulations due to compliance costs, reputational concerns, and future growth opportunities.

Greening through trade

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