Emission strategies of conglomerates: pollution emission and transfer mechanisms under energy regulation

Abstract Conglomerates constitute a core component of modern economies and play a pivotal role in resource allocation. Using China’s “Top 1,000” energy conservation program as an exogenous policy shock, this paper employs a difference-in-differences design based on manufacturing firm panel data to investigate how energy regulation affects intra-conglomerate pollution strategies. We find that stringent energy regulation significantly reduces pollution emissions at targeted firms, yet leads to substantial pollution being shifted to their unregulated affiliates. Internal pollution relocation is more prevalent among larger, capital-intensive, high-tech, and state-owned enterprises. Mechanistically, energy regulation improves energy efficiency and end-of-pipe treatment at regulated firms, while also enhancing abatement at their affiliates. Moreover, energy regulation generates significant spillover effects on both pollution abatement and employment in affiliated firms. This study provides novel empirical evidence on the efficacy of energy-saving policies and illuminates how conglomerates adjust production decisions in response to regulatory pressure.