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Combining time variations, cross-province variations in policy intensity, and variations in pollution intensity across industries, we estimate the impact of environmental regulation on firm exports. We find that in more pollution-intensive industries, stricter environmental regulation reduces both the probability that a firm will export and the volume of exports. Heterogeneous tests show that the impact is smaller for SOE firms and for firms located in the central and western part of China. We also find that the reduced probability that a firm will export is driven by a decline in non-exporters entering the export market. [ABSTRACT FROM AUTHOR]

We study environmental regulation and its role for trade in China. Specifically, we assess the effectiveness of an environmental policy in China that introduced stricter regulations on sulfur dioxide (SO 2 ) emissions in targeted cities. To identify the causal effect of this policy on exports, we use sectoral export data for a panel of Chinese cities and exploit variations in exports between cities and sectors, over time, and, in a second step, between firm types. We find a relative fall in sectoral exports in targeted cities after the implementation of the policy, which is sharper the more polluting the industry. Further, we find that the observed effect is mainly driven by privately owned firms, whereas exports of state-owned firms seem to be unaffected by the new policy. This finding is consistent with the preferential political treatment of state-owned firms in China. [ABSTRACT FROM AUTHOR]