No.629 Blockchains for Environmental Monitoring: Theory and Empirical Evidence from China

本期主题

Blockchains for Environmental Monitoring: Theory and Empirical Evidence from China

We present the first piece of empirical evidence on blockchain adoption for environmental monitoring. Using a staggered difference-in-difference (DID) framework, we find that the concentrations of SO2, NO2, CO in blockchain adopting cities in China are on average lowered by 17%, 8% and 4%, respectively, compared to other cities, however, the average quarterly GDP growth in those cities is reduced by 1.6%-2.6%, mostly driven by the reduction in the industrial sector. Further evidence shows that firms in adopting cities open more plants in other cities to avoid regulation. We then build a theory of endogenous firm pollution, environmental monitoring, and blockchain adoption to elucidate how blockchains without crypto affect environmental monitoring efficiency and pollution levels. The model implies that cities suffering higher social loss from pollution or having lower blockchain adoption cost are more likely to adopt the blockchain. Adopting blockchains reduces the local pollution level, albeit at the cost of decreased production. However, as some firms relocate to non-adopting cities in response to the introduction of blockchain, a partial adoption of blockchain won’t reduce the aggregated pollution level in the economy if social losses from pollution are highly dispersed across cities or firms’ preferences for city locations are weak.