Abstract
Firms strategically locate and time their emissions to evade environmental regulations. We uncover a novel form of temporal evasion: firms discharge wastewater into waterways during periods of heavy rains. By employing a difference-in-differences approach and analyzing high-frequency water quality monitoring and rainfall data, we find that water pollution concentrations rise more significantly in catchment areas densely populated by polluting firms relative to low-density areas. Our empirical findings align with a stylized model that predicts polluters exploit the dilution effects of rainfall to strategically increase wastewater discharge under a threshold-based monitoring system. We estimate that this covert “polluting-in-the-rain” behavior can offset 43% of China’s annual emission reduction targets.