Specialized 'green' courts actually make companies quit polluting industries entirely instead of just cleaning up their act.
Instead of investing in green technology to meet court standards, firms respond to the threat of specialized judicial enforcement by diversifying into unrelated, non-polluting business sectors to escape the court's jurisdiction altogether.
Enforcing the Environment: How Specialized Courts Affect Corporate Diversification
SSRN · 6382578
We examine whether access to specialized environmental courts influences corporate diversification. We use the staggered creation of these courts in different cities at different times as our research setting and find evidence that firms with access to these courts significantly increases corporate diversification, particularly among firms in high-pollution industries. These effects are stronger when courts have non-local jurisdiction where enforcement is more credible, and are driven by diversi