The Pressure of Economic Growth Target and Carbon Emissions : Firm-Level Evidence from China

Balancing economic growth and environmental damage is an important issue for developing countries. This paper studies the effects of government economic growth target pressure on corporate carbon emissions. We combine manually collected government growth target data and detailed firm-level data of China from 2008 to 2012. We show that a standard deviation rise in economic growth target pressure on the government is associated with a 3.4% increase in corporate carbon emissions. The results are robust to the impact of official tenure, pressure from peers, financial crisis, and endogenous problems. Moreover, the positive effect of growth target pressure on carbon emissions is more pronounced in state-owned firms, subsidized firms, small and medium-sized firms, and companies located in the middle and east regions of China. Further mechanism analysis indicates that the increase in growth target pressure reduces enterprises’ carbon energy efficiency and induces them to consume more carbon content energy. Our evidence suggests that governments should consider sustainable development goals in multi-dimensions to balance economic growth and environmental protection