Page 32 - Special Topic Session (STS) - Volume 2

STS452 Yang C. et al.

Value-added exports and trade-embodied carbon
emission of China's industrial sectors
with heterogeneity of firm size
Yang Cuihong 1,2* , Zhang Junrong
1,2
1 Academy of Mathematics and Systems Science, CAS, Beijing, China
2 University of Chinese Academy of Sciences, Beijing, China

Abstract
In recent years, with the rapid growth of the economy, China has become one
of the largest CO2 emitters as well as the important exporter and importer in
the world. How to effectively reduce carbon emissions generated by China's
trade has aroused wide attention of governmental agencies and the academia.
However, the existing studies exploring the trade-embodied carbon emission
abatement solutions are based on the national level or the industry level,
which are lack of in-depth research from the firm level. In fact, all the policies
such as foreign trade and carbon emission reduction rely on the specific
implementation of firms following a policy process in a bottom-up way.
Specifically, the rapid development of China's economy has bred a large
number of small and medium-sized firms. Under this background, it is of great
significance to study the respective roles of different sized firms in China’s
economy and environment. In this study, we construct a newly extended
Chinese input-output model (LMS model) for the year 2012, considering the
heterogeneity of firm size, to explore the contributions on value-added
exports as well as trade-embodied carbon emission of different sized firms in
China. The results show that small and medium-sized firms play a crucial role
in promoting China's economic development, both generating more than 60%
of China industrial sector’s total output and value-added. Meanwhile, small
and medium-sized firms also produce more than half of the China industrial
sector’s total emissions, acting as a dominant driving factor to the China’s
carbon emissions. This study also investigates that in China's foreign trade, the
value-added created by per unit input of medium-sized firms in industrial
sector is higher than the other firm types. While small-sized firms have the
highest embodied carbon emissions generated by per unit export, which fully
demonstrates that the export products structure of small-sized firms is facing
with optimizing and upgrading in the future. This study may provide some
differentiated policy implications at firm level which can help to promote trade
mode and carbon emission abatement in China.

Keywords
Firm heterogeneity by size; input-output table; value-added; carbon
emission; China

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