Affordability of energy cost increases for companies due to market-based climate policies: A survey in Taicang, China

Abstract

This paper estimates the affordability of increased energy costs for Chinese companies due to the possible introduction of carbon pricing policies. The data were collected from 121 valid respondents in Taicang, China, using a multiple-bounded discrete choice (MBDC) format. Estimations indicate that a mean of 8.5% in energy cost increase would be acceptable for the surveyed companies on the whole. Companies from chemical and dyeing industries expressed a slightly higher affordability, with the mean of acceptable energy cost increase being 9.8% and 9.4% respectively. Econometric analysis identified two determinants of affordability for companies. One is the current energy price level, having a significant but negative relationship with affordability. The other is the energy management strategies of companies, significantly and positively associated with affordability. Calculations indicate that the mean of affordable energy cost increases for companies roughly equals a carbon price of 60 CNY/t-CO2 (about 9 USD/t-CO2). This result may be used as a referendum during the development of carbon tax policy and the establishment of a domestic carbon emissions trading scheme in China from the perspective of individual companies.