A Green Bargain? The Impact of an Energy Saving Program on Productivity Growth in China's Iron and Steel Industry

MIT Center for Energy and environmental policy research, WP 2017-005

84 Pages Posted: 22 Mar 2017 Last revised: 25 Mar 2017

See all articles by Massimo Filippini

Massimo Filippini

ETH Zürich; University of Lugano - Faculty of Economics

Thomas Geissmann

Massachusetts Institute of Technology; ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Valerie Karplus

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Da Zhang

Massachusetts Institute of Technology, Sloan School of Management, Students

Date Written: March 21, 2017

Abstract

The impact of environmental regulation on firm productivity has been long been debated, however, mainly for western economies and with limited firm-level evidence. We study the impact of a large-scale national energy saving program (the Top 1000 Energy-Consuming Enterprises Program, or T1000P, 2006-2010) in China on firm productivity in the iron and steel industry. The T1000P assigned targets for reducing the energy consumption of approximately 1000 most energy-consuming industrial firms. Using detailed data from the China Industrial Census on 5,340 firms for the period of 2003 to 2008, we estimate a positive effect of the T1000P on firms in the iron and steel industry. Specifically, we find T1000P firms are associated with significantly greater annualized TFP change (an increase of 3.1 percent on average), suggesting the competitiveness of treated firms increased. Effects on technical change and scale efficiency change are positive and statistically significant, and contribute about equally to the overall treatment effect. Results are robust to instrumenting for policy exposure and other alternative specifications. Private benefits to firms from the policy likely reflect the combination of incentives and targets applied under the program.

Keywords: Total factor productivity, China, Iron and steel industry, Environmental regulation, Policy evaluation

JEL Classification: C23, C26, C51, D04, D22, D24, L50, L61, Q52

Suggested Citation

Filippini, Massimo and Geissmann, Thomas and Karplus, Valerie and Zhang, Da, A Green Bargain? The Impact of an Energy Saving Program on Productivity Growth in China's Iron and Steel Industry (March 21, 2017). MIT Center for Energy and environmental policy research, WP 2017-005. Available at SSRN: https://ssrn.com/abstract=2938503 or http://dx.doi.org/10.2139/ssrn.2938503

Massimo Filippini

ETH Zürich ( email )

ETH-Zentrum
CH-8092 Zurich
Switzerland

University of Lugano - Faculty of Economics ( email )

Via Giuseppe Buffi 13
CH-6900 Lugano, CH-6904
Switzerland

Thomas Geissmann (Contact Author)

Massachusetts Institute of Technology ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

Valerie Karplus

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

77 Massachusetts Ave. E62-663
Cambridge, MA 02142
United States

Da Zhang

Massachusetts Institute of Technology, Sloan School of Management, Students ( email )

Cambridge, MA 02139
United States

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