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In recent years, the rate of climate change appears to have accelerated, and digital transformation and environmental performance have become increasingly important in the field of corporate social responsibility. Previous studies have mainly focused on the economic consequences of digital transformation. However, research on the effect of digital transformation on reducing firms’ emissions is relatively rare. This study focused on two kinds of typical environmental pollutants: waste gas emissions and wastewater emissions. Using data on Chinese listed firms from 2010 to 2018 and adopting the fixed effect model to investigate the emission reduction effect and mechanism of digital transformation on waste gas emissions and wastewater emissions of firms, we found the following: (1) digital transformation significantly reduces pollution emissions; (2) the relationship is more pronounced in state-owned enterprises (SOEs), high-polluting enterprises, and economically developed regions; (3) to gain a more in-depth understanding of how digital transformation affects the pollution emission behavior of firms, we further conducted mechanism tests and found that digital transformation reduces pollution by increasing total factor productivity and green innovation and improving firms’ internal controls. The above conclusions still hold after a series of robustness tests, including alternative econometric specifications and overcoming potential endogeneity with an instrumental variable. Overall, our findings provide new insights into the effect of digital transformation on environmental pollution emissions. Hence, all governments should pay more attention to digital transformation for sustainable development and improved environmental quality.

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Studying the driving factors of environmental pollution is of great importance for China. Previous literature mainly focused on the cause of national aggregate emission changes. However, research about the effect of fiscal expenditures on science and technology (FESTs) on environmental pollution is rare. Considering the large gap among cities in China, it is necessary to investigate whether and how FESTs affect environmental pollution among cities. We adopted three kinds of typical environmental pollutants including sulfur dioxide (SO2) emissions, wastewater emission, and atmospheric particulate matter less than 2.5 micrometers in diameter (PM2.5). Using the data of 260 prefecture-level cities over ten years in China, we found that FESTs play a significantly positive role in reducing sulfur dioxide (SO2) emissions and PM2.5 concentrations, but fail to alleviate wastewater emissions. Specifically, for every 1% increase in FESTs, SO2 emissions were reduced by 5.317% and PM2.5 concentrations were reduced by 5.329%. Furthermore, we found that FESTs reduced environmental pollution by impeding fixed asset investments and by promoting research and development activities (R&D). Moreover, the impacts of FESTs on environmental pollution varied across regions and sub-periods. Our results are robust to a series of additional checks, including alternative econometric specifications, generalized method of moments (GMM) analysis and overcoming potential endogeneity with an instrumental variable. Our findings confirm that government efforts can be effective on pollution control in China. Hence, all governments should pay more attention to FESTs for sustainable development and environmental quality improvements.