More than half of China's CO2 emissions are from micro, small and medium-sized enterprises

To date, the burden of CO2 emissions reductions has been largely confined to large enterprises in China. Using new data with firm ownership and size information included, we show that micro, small and medium-sized enterprises (MSMEs) produced 53% of China's CO2 emissions in 2010. Detailed supply-chain analysis reveals that final demand for products made downstream by domestic-private MSMEs, along with exports made downstream by foreign-owned MSMEs, are the main drivers of China's CO2 emissions. Most of these emissions occur upstream in the electricity and heat sector, which is mainly controlled by large, state-owned enterprises with the highest carbon intensity, and the non-metallic mineral sector, which consists of a very large number of domestic-private MSMEs with lower levels of enforcement of emissions regulations. Overall, MSMEs induced 65% of China's CO2 emissions through their supply chains. Our conclusion is that understanding the role of firm size for China is important in developing emissions reduction policies: given the very high per-enterprise overhead of emissions trading systems, and the abundance of MSMEs, our results clearly favour taxation.