The Impact of Energy Saving Policies on Industries in China

Abstract

Current design and implementation of China's energy saving policies are characterized by multiple, mixed policy instruments and spatially based regulatory disparity. The dissertation replies on interviews, firm-level data, and industry-aggregate data to examine the impact of energy saving policy on firm-level energy saving and industry location in China. Case study research, using interviews with 20 firms in four industries and four locations, is applied to explain firm energy saving behaviors. The case studies show that competitiveness and legitimation are major motivations for energy saving under the policy influence of energy-saving agreements and capacity control and elimination.

Extending from the case study findings, the dissertation examines on the basis of data of firms involved in the Top-1000 enterprise energy saving program the factors that contribute to energy efficiency improvements. Empirical results show that firms with less expansion and no new products are more likely to fulfill greater reduction of energy intensity for both existing and new production capacities. Their energy savings are driven by the pressure of lower individual and industry profit, higher electricity price and more subsidies, but are not correlated with any behavioral features identified in the previous literature.

Spatially based regulatory disparity may direct industry growth to regions with lower regulation. Analysis of industry aggregate data from 2005 to 2010 confirms policy-induced industry location, and indicates that an 11% employment loss in manufacturing industries is associated with higher energy-saving regulation. The results suggest the need of future policy assistance for energy saving and resource conservation in regions with laxer regulations, and for the reallocation of labor and production.

The dissertation complements the literature on the explanations for the energy efficiency gap, implications of policy instruments on firm behavior, and locational impact of environmental regulation. It suggests the effectiveness of combined mandatory, voluntary, and information policies designed to motivate firms and eliminate behavioral barriers, the usefulness of incorporating market-based policy in Chinese energy saving policies to encourage energy efficiency and mitigate relocation, and the need for further research into the cost effectiveness of financial incentives to meet efficiency targets for industries.