Why does economic policy uncertainty increase firm-level pollutant emission?

Previous studies show that economic policy uncertainty (EPU) reduces corporate pollutant emission via suppressing economic activities. In contrast to these findings, this study examines firm-specific pollutant emission capturing various pollutant-containing gases and finds that greater EPU increases corporate pollutant emission in China due to less restrictive environmental regulation or reduced corporate environmental investment. The effect of EPU on pollutant emission is more pronounced for firms located in regions with less intensive environmental regulation. Furthermore, non-state-owned enterprises are more sensitive to economic policy shocks and more likely to increase their pollutant emission when facing high EPU. The findings highlight the importance of understanding corporate strategic responses under EPU that shape their corporate social responsibility behaviors.