Chinese-style carbon emission reduction: Micro mechanisms of state-owned enterprises

Abstract

This article investigates whether state-owned enterprises (SOEs) exhibit a positive response to regional pressure for carbon emission reduction. By collecting and analyzing firm-level carbon emissions data in China from 2008 to 2021, we find that when faced with increased pressure to reduce emissions in a specific region, SOEs exhibit a substantial reduction in their carbon emissions compared to non-SOEs. Furthermore, this relationship is more remarkable among enterprises operating in high-emission industries and located in regions characterized by low economic growth objectives, but there is no heterogeneity in the executive environmental background. The mechanisms of political promotion incentives for SOE executives play a significant role in mitigating emissions through the combined effects of promoting green innovation and reducing output. Additionally, SOEs demonstrating stronger efforts in carbon emissions reduction are more likely to receive the compensations from governments, including green subsidies and lower bank credit costs and they have exhibited superior economic performance in subsequent years. These findings reveal the micro mechanisms behind China's regional carbon reduction and highlight the crucial role played by SOEs.