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Impacts of China's differential electricity pricing on the productivity of energy-intensive industries

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  • Zheng, Xuemei
  • Wu, Chengkuan
  • He, Shijun

Abstract

Using China's Industrial Enterprise Database (CIED) from 1998 to 2007, this paper investigates how the differential electricity pricing (DEP) policy affects the total factor productivity (TFP) of energy-intensive industries in China. Based on the TFP of energy-intensive industries estimated through the Olley-Pakes (OP) and Levinston-Petrin (LP) approaches, this paper estimates the treatment effects of the DEP policy through the method of propensity score matching and difference in differences (PSM-DID). The results indicate a significant negative effect of the DEP on the TFP of energy-intensive industries shortly after the DEP implementation. This finding could be explained by the rapidly increasing costs for energy-saving technologies that occurred within firms over a short time. Moreover, the estimated dynamic marginal effects demonstrate that the policy effect became positive in the following years, implying that the role the DEP policy plays shifted from increasing costs to stimulating technology improvement for energy-intensive industries. Heterogeneity analysis suggests that the treatment effects remain large and statistically significant for regions less dependent on energy-intensive industries, regions with better policy enforcement, and small-sized firms. The results remain robust in the counterfactual test, in the robustness check that takes account of the lagging effect of policy and in the robustness checks that considers more control variables or extends the time period of analysis. Based on these findings, this paper provides important policy implications for better design of the mechanisms to improve the productivity in China.

Suggested Citation

  • Zheng, Xuemei & Wu, Chengkuan & He, Shijun, 2021. "Impacts of China's differential electricity pricing on the productivity of energy-intensive industries," Energy Economics, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:eneeco:v:94:y:2021:i:c:s014098832030390x
    DOI: 10.1016/j.eneco.2020.105050
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    Cited by:

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    3. Shen, Bo & Hove, Anders & Hu, Junfeng & Dupuy, Max & Bregnbæk, Lars & Zhang, Yuejun & Zhang, Ning, 2024. "Coping with power crises under decarbonization: The case of China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 193(C).
    4. Jia, Wentao & Xie, Rui & Ma, Chunbo & Gong, Zezhong & Wang, Hui, 2024. "Environmental regulation and firms' emission reduction – The policy of eliminating backward production capacity as a quasi-natural experiment," Energy Economics, Elsevier, vol. 130(C).
    5. Wang, Chonghao & Lin, Boqiang, 2024. "Does industrial relocation impact green economic efficiency? Evidence from China’s energy-intensive industries," Research in International Business and Finance, Elsevier, vol. 70(PB).
    6. Tinggui Chen & Chenhao Tong & Yuhan Bai & Jianjun Yang & Guodong Cong & Tianluo Cong, 2022. "Analysis of the Public Opinion Evolution on the Normative Policies for the Live Streaming E-Commerce Industry Based on Online Comment Mining under COVID-19 Epidemic in China," Mathematics, MDPI, vol. 10(18), pages 1-27, September.
    7. Stanislav Zabojník & Dusan Steinhauser & Viktoria Pestova, 2023. "EU Decarbonisation: Do EU Electricity Costs Harm Export Competitiveness?," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 25(63), pages 522-522, April.

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