Marketization without mitigation? Designing mixed-ownership reform under decarbonization constraints

This paper asks whether mixed-ownership reform (MOR), the expansion of non-state ownership through reductions in the state share in state-owned enterprises (SOEs), supports or undermines decarbonization goals. MOR is widely adopted to improve efficiency and competitiveness, yet reform designs often understate how stronger profit incentives and market pressures can reshape firms’ emissions behavior. Using matched firm-level production and fuel-use data for Chinese industrial SOEs, we estimate the effect of MOR on carbon intensity. We find that MOR increases carbon intensity by about 1.2%. Mechanism evidence indicates that reform strengthens profit orientation, coincides with weaker environmental management (fewer pollution-control facilities), and shifts energy use toward coal at the margin. Employment also falls following reform, pointing to adjustment costs that can shape political feasibility. The findings imply that ownership diversification is not, by itself, a decarbonization instrument and can generate emissions-intensity backsliding where constraints and monitoring are weak. We recommend designing MOR as a bundled reform: attach enforceable no-backsliding conditions on emissions intensity, embed carbon and energy KPIs in governance and managerial evaluation, apply risk-tier monitoring in high-risk regions and sectors, accelerate coal switching and efficiency upgrades, and pair reforms with just-transition supports.