Disguised Pollution: Firm behaviour in the dark

In this study we investigate disguised pollution by industrial firms in China. We find that sulfur dioxide (SO2) readings increase by 10.8% in air pollution monitoring stations four hours after sunset in high factory density areas, controlling for station-year, date, and city-hour fixed effects. Physical inspections by the Ministry of Environmental Protection may only temporarily reduce disguised pollution, suggesting that reliance on physical inspections to enforce regulations is ineffective if firms can shift production activities to non-daylight hours. We show that direct monitoring, as is done with some large polluters in China, can prevent this and should be cost-effective to extend to all industrial polluters.

Agarwal, Sumit and Han, Yajie and Qin, Yu and Zhu, Hongjia, Disguised Pollution: Industrial Activities in the Dark (April 28, 2023). Available at SSRN: https://ssrn.com/abstract=3359404 or http://dx.doi.org/10.2139/ssrn.3359404