Economic policy uncertainty, firm carbon emissions and regional heterogeneity: evidence from China's exporters

Based on microlevel data from China’s exporting firms, this study examines the effects of economic policy uncertainty (EPU) in export destinations and its interaction with spatial heterogeneity on firms’ CO2 emission behavior. We find that the effect of economic policy uncertainty in export destinations on firms’ CO2 emission intensity is positive and quantitatively significant. Moreover, this effect is more pronounced in regions characterized by low financial constraints, weak environmental regulations or high marketization, in the eastern region and in firms whose primary export destinations are developing countries. Through a comprehensive discussion of the underlying mechanisms, the study finds that economic policy uncertainty primarily influences firms’ CO2 emission intensity by increasing the intensity of fossil fuel usage and reducing the variety of clean products for export, while the impact of the green innovation channel is not statistically significant. From the perspective of spatial heterogeneity effects, our research findings provide empirical evidence and policy implications for governments in addressing the challenges posed by uncertainty shocks and environmental pollution governance.