Poison or catalyst? How do energy saving targets matter for firm-level productivity in China

Abstract

China’s Top-10000 Enterprises Energy Conservation and Low Carbon Program, enacted in 2011, sets binding energy saving targets for enterprises. However, whether energy saving target setting is a poison or a catalyst remains controversial, and no research has been conducted on how the targets affect enterprises’ total factor productivity. We construct 2012–2013 panel data models by mapping the enterprises subject to the energy saving targets onto the China Industrial Enterprise Database to systematically quantify the effects of the targets on enterprises’ total factor productivity. The study reveals an inverted-U-shaped curve between energy saving targets and manufacturers’ total factor productivity. We also find that the targets boost an enterprise’s total factor productivity by expanding the enterprise’s market share and their impacts vary according to region, type of enterprise, and industry. The study shows that setting appropriate energy saving targets can improve the environment and boost enterprise productivity.