Effects of Ownership Reform on Energy and Emission Intensity of Chinese Firms

This study examines the effect of privatization on the pollution emission intensity of companies by exploiting the quasi-natural experimental ownership reforms of state-owned enterprises in China. By matching corporate pollution emissions with firm-level microdata from 1998 to 2007, we employ a difference-in-differences strategy to identify the environmental effects of privatization. Our findings reveal a significant increase in corporate SO2 intensity and smoke and dust intensity by 12.5 percent and 12.3 percent, respectively. The magnitude of the effect varies significantly across regions and differs by the nature of ownership. We observe significant changes in production technologies and environmental mitigation strategies in state-owned enterprises (SOEs) after privatization. Privatized SOEs undergo major changes in their corporate energy input structures and tend to make a significant strategic shift in their approach to pollution mitigation, investing less in environmental innovation in production and focusing more on end-of-pipe treatments. JEL Classification: D22, L33, L51, Q53