Green development is the key content of the new development concept. Since 1990s, market segmentation led by“beggar-thy-neighbor”and“local protectionism”among local governments has obviously obstructed the process of green development. Therefore, breaking market segmentation by realizing the free flow of products and factors is the necessary institutional support for accelerating the implementation of the concept of green development.

Based on the above, this study attempts to make contributions in the following three aspects: （1）Succeed to Copeland & Taylor（1994）, it develops a theoretical model for analyzing enterprises’ pollution emission decisions under market segmentation, by introducing inter-regional trade cost and game behavior.（2）It applies the micro-level data of China Industrial Enterprise Database and China Enterprise Green Development Database from 2000 to 2012, and constructs the indicators of enterprise pollution emissions and market segmentation which are more in line with reality.（3）It explores the micro-level mechanism through which market segmentation acts on enterprises’ pollution emission behavior, which provides practical path support for deepening the reform of market integration and environmental regulation.

This study shows that breaking regional market segmentation could significantly reduce enterprise pollution emissions, which can be realized through three channels: scale effect, technology effect, and allocation effect. The conclusion is still stable after considering a series of endogenous problems. Meanwhile, the impact is highly heterogeneous. Specifically, market segmentation has a greater impact on private enterprises, non-technology-intensive enterprises and enterprises in Central China. Finally, through the introduction of reasonable performance evaluation indicators and environmental regulations to break market segmentation, it can play a positive role in regulating enterprise emission reduction.