Does China's low-carbon city pilot intervention limit electricity consumption? An analysis of industrial energy efficiency using time-varying DID model

Abstract

Emissions depletion through pro-environmental interventions by top emitters like China has profound significance in improving the atmosphere's cumulative carbon efficiency. China's electricity sector is accountable for almost 40% of its total aggregated emissions, indicating that China's electricity sector does not yet follow the energy conservation and energy efficiency theories, which require urgent attention if China aspires to achieve carbon emissions peak and neutrality by 2030 and 2050, respectively. Chinese lawmakers have adopted pro-environmental interventions to limit emissions, like constructing low-carbon city pilots (LCCP). LCCP intervention has successfully curbed emissions in China's major cities, which earlier studies have validated. However, no study assesses whether the LCCP intervention supports enterprises in reducing their electric energy consumption intensity (EECI) by upgrading their energy conservation attitude and improving power efficiency. To address this fundamental question, we construct a time-varying difference-in-difference (DID) model to comprehensively investigate the consequences of LCCP intervention on EECI, using matched data from the Chinese Enterprise Pollution Emissions Database and the Chinese Industrial Enterprise Database from 2007 to 2014. The findings unfold as follows: 1) The LCCP intervention significantly reduces the firm's electricity consumption intensity (i.e., a one percentage point increase in LCCP curbs EECI by 3.14%). 2) We observe significant heterogeneity in the effect of LCCP on EECI based on the ownership, location, and input characteristics of the intervened firms (i.e., LCCP has an insignificant effect on EECI for firms that are state-owned, labor-driven, and located in western zones. However, it has a more substantial inhibitory effect on EECI for firms that are: located in non-resource-based cities, foreign and private-owned, capital and technology-driven, and non-western). 3) The LCCP intervention promotes enterprises' power consumption via the energy-saving and green innovation effects, which boosts enterprises' energy conservation attitude and energy efficiency in the long term. The conclusion remains untapped after mitigating sequence-related issues, limiting the influence of alternative policies, employing lagged terms, and deploying different estimation strategies (i.e., PSM-DID). Several policies have been advocated in line with the findings in the ultimate section.