Decomposition of industrial SO2 emission in China with firm entry and exit

Abstract

The difficulty of the sulfur dioxide (SO2) pollution control task has deepened step by step in recent years, while the marginal cost of environmental protection in China has also been higher. Therefore, it is necessary to study the main impact factors of China's industrial SO2 pollution. Based on China's Industrial Environmental Statistics Database from 2004 to 2013, this paper extends the Index Decomposition Analysis (IDA) with firm entry and exit to conduct a micro-level decomposition study. The industrial SO2 emission in China is decomposed into scale effect, composition effect, firm growth effect, and firm selection effect. Also, we use the Dagum Gini coefficient to analyze the spatial differences of firm growth effect and selection effect between the eastern, central, and western regions in China. This paper finds that the main contribution of industrial SO2 emission control in China is the firm growth effect, which was −103% between 2004 and 2013. And the second largest contribution term is the firm selection effect, which is −18%, while the composition effect is −15%. In terms of temporal patterns, the size of the firm growth effect shrinks as time grows, and the composition effect changes from negative to positive after 2009. For spatial difference analysis, the Dagum Gini coefficient of technique effect and firm growth effect between different regions have become smaller and smaller over time, while the spatial differences of firm selection effect between regions remain unchanged.