Government environmental attention and carbon emissions governance: Firm-level evidence from China

Climate change induced by carbon emissions has received extensive global attention. However, with the ever-increasing environmental attention from governments, whether firms, as main contributors to carbon emissions, have responded to the government’s call to achieve carbon abatement target is uncertain. To answer this question, we manually collected urban government work reports from 2007-2016 and extracted environment-related textual content to quantify government environmental attention (GEA). Employing firms’ carbon emission data from National Tax Survey Database (NTSD), this paper explores the impact of GEA on firms’ carbon emissions governance. We observe that the increase in GEA cuts firms’ carbon emissions. The results remain solid after using the instrumental variable method to alleviate endogeneity problems. The mechanism analysis reveals that GEA reduces firms’ carbon emissions via three environmental-related decision-making behaviors of government: environmental regulations, fiscal expenditure and subsidy policies, and energy structure transformation strategies. Heterogeneity analysis shows that GEA notably reduces firms’ carbon emissions from burning coal and oil energy. Moreover, firms in eastern-north, central, and western regions are more susceptible to GEA, while the impact is insignificant for firms in eastern regions. Furthermore, the carbon reduction performance is more pronounced for enterprises in capital-intensive, technology-intensive, and high polluting industries. This study provides a reference for policymakers to ensure the enforcement of carbon emissions governance of firms and to reach carbon abatement targets.