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Review of Finance Vol. 29 No. 5 2025

Blockchains for environmental monitoring: theory and empirical evidence from China

Lin William Cong1,2,3; Yuanyu Qu4; Guojun Wang5

1 Cornell University SC Johnson College of Business (Johnson) , Ithaca, NY, · 2 International School of Finance, Fudan University , Shanghai, · 3 ABFER, Singapore; IC3, United States; NBER, United States · 4 China School of Banking and Finance, University of International Business and Economics , Beijing, · 5 School of Finance and Business, Shanghai Normal University , Shanghai,

Abstract

We explore the effects of a blockchain-based environmental monitoring technology on emissions. Our model of firm competition in the presence of regional regulators reveals that blockchain adoption reduces industrial pollution but triggers business relocation, creating trade-offs between local emission reduction and economic contraction. When pollution-induced social losses are highly dispersed across cities, a partial-adoption equilibrium fails to mitigate aggregate emissions because of the pollution leakage. We further present the first piece of empirical evidence corroborating model predictions, by taking advantage of a recent regulation change in China. The concentrations of SO2, NO2, and CO in blockchain-adopting cities are on average 16.6 percent, 7.9 percent, and 4.6 percent, respectively, lower than other cities. However, blockchain-based monitoring disproportionately hurts the industrial sector, and the average economic growth are 1.8–2.6 percent lower than other cities. Firms in adopting cities open more non-local plants to avoid regulation.

DOI
10.1093/rof/rfaf033
Volume
29
Issue
5
Pages
1303-1336
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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