Appraising the role of energy conservation and emission reduction policy for eco-friendly productivity improvements: An entropy-balancing DID approach

Abstract

In pursuit of low-carbon and high-quality economic development, the Chinese government has implemented an energy conservation and emission reduction (ECER) policy. It has piloted this policy for three groups of prefecture-level cities since 2011. So far, there is no systematic evidence to demonstrate whether such a strategy can help China achieve a “win-win” situation between energy conservation and environmental protection. To identify the causal effect of the ECER policy on eco-friendly productivity (EFP), we explore variations in the timing of this policy across cities combined with the entropy-balancing method and assemble a balanced panel dataset encompassing China's 283 cities from 2006 to 2017. Empirical findings demonstrate that EFP in the ECER pilot cities had increased by 15.3% on average compared with EFP in non-ECER pilot regions based on the difference-in-differences framework. Notably, the ECER policy generates significant positive spatial spillover effects on surrounding ECER pilot regions. Our channel analysis confirms that the positive effect of the ECER policy is also realized through energy savings, structural effects, and green technological effects. Moreover, the observed effect is significantly heterogeneous regarding geographical locations, resource endowment, whether a city has an old industrial base, and environmental regulation. Finally, several policy implications concerning China's ECER policy and EFP improvement are put forward.