Navigating the Effect of Environmental Uncertainty on Carbon Emission: Evidence from Chinese Non-Financial Enterprises

Environmental uncertainty (EU) has become one of the key determinants influencing corporate decision-making, yet the existing literature has not sufficiently explored its effects. Based on the data from Chinese non-financial public companies during the period from 2010 to 2023, we examine the impact of EU on carbon emission. The empirical results show that EU has a significant negative impact on corporate carbon emission. Specifically, a one-unit increase in EU leads to approximately a 9.13 percent decline in carbon emission. Furthermore, we find that EU increases firms’ financing constraints, thereby reducing capacity-utilization and carbon emission. Meanwhile, EU can spur innovation, resulting in active decarbonization. Finally, the finding is more pronounced in non-state-owned enterprises (N-SOEs). The above findings shed light on promoting carbon reduction for policymakers and corporate operators.