Though there has been a proliferation of strategies and initiatives formulated at both national and international levels to catalyse sustainable development, most are, in effect, implemented in the subnational jurisdictions. Therefore, it is important to address how local government responds to catalyse sustainable development under an environmental decentralisation regime. Prior studies focusing on environmental decentralisation come mainly from developed countries, whereas our paper examines how local governments in China involved in a low-carbon pilot programme react to stringent environmental regulations (ERs) from central government, reflected by changes in land transfer of pollution-intensive industries (PIIs). Our results show that a low-carbon pilot programme reduces land transfer of PIIs by 34.45 ha, due mainly to a decrease in the number of small PII projects. Meanwhile, our research furthers the understanding of environmental decentralisation literature by showing that public awareness, fiscal imbalance, and market-oriented reform can improve local enforcement. Besides, our study contributes to understanding the mixed effect of ERs on firm location, which is likely to be driven by the socio-economic conditions of jurisdictions. Our study also provides practical implications for catalysing sustainable development in those countries with traits of environmental decentralisation and disparate development.