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Coping with Externally Imposed Energy Constraints: Competitiveness and Operational Impact of China’s Top-1000 Energy-Consuming Enterprises Program

Global climate change has caused governments worldwide to take actions to improve their energy efficiency. This paper investigates how China's Top-1000 program, a command-and-control type of energy-saving mandate, has affected the operational choices of firms, and in turn, their profitability. We apply the propensity score matching method to find "identical twins" for the participants in the Top-1000 program, then conduct a difference-in-differences analysis on the matched sample. Our findings suggest that the profitability of the enterprises targeted for energy savings decreased by one-third, mainly due to increased production costs. The targeted enterprises tended to increase their fixed assets per capita, which was associated with improvements in energy efficiency. Furthermore, compared to similar untargeted enterprises, there was a significant slowdown in the production growths of the targeted enterprises, raising concerns about carbon leakage due to increased production by less efficient producers.

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Keywords: Energy constraints, Intensity standards, Economic impact, Operational choice

DOI: 10.5547/01956574.44.2.yxia

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Published in Volume 44, Number 2 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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