Working Paper
Emissions Leakage and Unilateral Environmental Regulations: The Case of China’s SO2 Policy (Joint with Justin J. Hong) (Link)
Abstract: In this paper, I investigate the issue of emissions leakage in the context of China’s SO2 reduction policy implemented during the 11th Five-Year Plan (2006-2010). By combining firm-level production, customs, and emissions data with global input-output data, I employ a geographically matched difference-in-differences strategy to identify and quantify the extent of emissions leakage. My results show that the policy led to a 12.5% reduction in firms’ global emissions. However, the increase in embodied emissions in imports offsets this reduction by 1.3 percentage points. The leakage was primarily driven by large firms importing from emission-intensive countries and sectors. I further find evidence of limited domestic leakage concentrated near the borders of regulated cities. These findings highlight the importance of considering emissions leakage and firm heterogeneity in the design and evaluation of unilateral environmental policies. This paper contributes to the literature on the pollution haven hypothesis, firm responses to environmental regulations, and intra-country spillovers of local policies.
Green Regulations, Uneven Growth: How Foreign Firms Shape Regional Economic Outcomes (Joint with Justin J. Hong)
Search Frictions and Competition in Global Sourcing