Environmental courts, production relocation, and carbon leakage: does environmental judiciary intensify spatial arbitrage?

We investigate whether environmental courts induce cross-regional carbon leakage through affiliated corporate networks. Using Chinese listed firms and their affiliated investees from 2005 to 2023, we exploit the staggered establishment of environmental courts as a quasi-natural experiment and employ a difference-in-difference-in-differences (DDD) framework. The results show that environmental courts significantly reduce carbon intensity among sending firms, but increase carbon intensity among affiliated receiving firms, revealing a clear ‘sending reduction-receiving increase’ pattern. Mechanism tests indicate that this carbon relocation effect mainly operates through the cross-regional reallocation of production activities and productive capital, rather than through labour mobility, green innovation, or intangible asset transfer. Moderation analyses further show that technological distance strengthens firms’ tendency to respond to environmental judicial pressure through spatial relocation, whereas CEO green technology experience weakens this tendency. Heterogeneity tests show that the relocation effect is more pronounced among firms with higher technological diversification and higher operating leverage, suggesting that resource reconfiguration capacity and adjustment-cost pressure jointly shape firms’ relocation responses. By uncovering the micro-level carbon leakage effects of environmental judicial specialization, this study extends the literature on environmental courts from local governance to spatial reallocation and provides policy implications for cross-regional judicial coordination and group-level carbon regulation.