Local government debt (LGD) has a crucial impact on the development of the economy. However, the vice effects of local government debt bonds have also garnered attention in recent years. Local governments lead the improvement and governance of regional pollution emissions. Therefore, understanding the influencing mechanism of local government debt on the regional environment can help us better comprehend the role of local government bonds. Using panel data on corporate pollution emissions and local government debt in China from 2006 to 2013, we investigate the relationship between local government debt and pollution emissions from enterprises. Our research suggests that local government bonds have a U-shaped effect on firms’ pollution emissions. (2) The level of local debt can impact the fiscal spending capacity of local governments, which in turn affects local pollution emissions. (3) Local government debt impacts the environmental governance of non-state-owned or financially constrained firms. This demonstrates that local government bonds can affect the government’s fiscal capacity. (4) Local government debt can impact the governance of local governments, potentially leading to relaxed regulations on corporate pollution emissions when faced with debt pressure.