Target Versus Price: Improving Energy Efficiency of Industrial Enterprises In China

Transcription

1 Target Versus Price: Improving Energy Efficiency of Industrial Enterprises In China Kuangyuan Zhang Department of Energy and Mineral Engineering The Pennsylvania State University June 16, 2014

2 Agenda Introduction and Background Research Design Data Description Econometric Model Results, Conclusions and Policy Implications 2

3 China Energy Efficiency Policy Research Design Econometric Model Data Results Conclusion Huge Industrial Electricity Consumption and Fast Growth China s Industrial Electricity Consumption* China s industrial electricity consumption caught up with US in 2001 with no sign of slowing down. *Resource: Lewis, D. (2010). Electricity Generation and Consumption Point to U.S. Industry as a Dimming Bulb vs. China. 3

4 China Energy Efficiency Policy Research Design Econometric Model Data Results Conclusion Results in Greenhouse Gas (GHG) Emission! China CO2 Emission (Tons) from 1980 to 2009* *Resource: Richard Black. (2011). China 'won't follow US' on carbon emissions 4

5 China Energy Efficiency Policy Research Design Econometric Model Data Results Conclusion Energy Saving and Emission Reduction-China s Most Important Energy Policy Energy is an important strategic issue concerning China's economic growth, social stability and national security, --Premier Wen Jiabao in the meeting of State Council s Energy Leading Group, China Daily, June 3, China announced Energy-Saving and Emission-Reduction Policy in its 11 th Five-Year plan in 2005, with a national target of reducing energy consumption per unit of GDP by 20% by

6 China Energy Efficiency Policy Research Design Econometric Model Data Results Conclusion Policy Instruments to improve energy efficiency: 1. Mandatory efficiency improvement targets for industrial enterprises. 2. Electricity price. Research Questions: 1. What effects do target and electricity price impose on China Industrial firms energy efficiency, and through what channels? 2. Do different enterprises respond differently to target and electricity price? (i.e. Economic Condition, Firm Size, whether or not under supervising of authority, technology level, etc.) 6

7 China Energy Efficiency Policy Research Design Econometric Model Data Results Conclusion Channels of Efficiency Improve: Internal R&D vs. Expenditure on Energy Efficiency Logic Flow 7

8 China Energy Efficiency Policy Research Design Econometric Model Data Results Conclusion Research Significance 1. No empirical evidence so far. 2. Important to better understand impacts of the mandatory target and electricity price on energy efficiency. 3. Helpful for future policy making. 4. The data is novel (survey completed by May, 2011). 8

9 China Energy Efficiency Policy Research Design Econometric Model Data Results Conclusion Average Target, Electricity Price and Efficiency for 211 Industrial Enterprises Hyperthesis: Target and Price are both effective 9

10 China Energy Efficiency Policy Research Design Econometric Model Data Results Conclusion Model : Target and Electricity Price s effect on Energy Efficien 10

11 China Energy Efficiency Policy Research Design Econometric Model Data Results 1.1 Targets and Electricity Price are both effectively driving energy efficiency to increase. (1) (2) (3) (4) Conclusion VARIABLES Efficiency Efficiency Efficiency Efficiency Target *** *** *** *** (0.075) (0.078) (0.078) (0.080) Electricity_Price *** *** *** *** (0.23) (0.241) (0.232) (0.241) Material1_Price (0.088) (0.084) Material2_Price Robust standard errors in parentheses, *** p<0.01, ** p<0.05, * p<0.1 (0.098) (0.098) 11

12 China Energy Efficiency Policy Research Design Econometric Model Data Results 1.2 Accumulative Internal R&D and Expenditure on Energy Saving are significant in improving energy efficiency. (1) (2) (3) VARIABLES Efficiency Efficiency Efficiency Exp (1.648) (1.474) R&D (0.820) (0.583) Exp_sum *** ** (0.119) (0.117) R&D_sum *** *** (0.186) (0.187) Conclusion 12

13 China Energy Efficiency Policy Research Design Econometric Model Data Results Conclusion 1.3 Process Optimization, Purchasing Foreign Equipment, Retrofitting and Purchasing Domestic Equipment are significant behaviors in improving Efficiency. (1) (2) (3) (4) (5) VARIABLES Efficiency Efficiency Efficiency Efficiency Efficiency R&D_sum *** *** *** *** *** (0.160) (0.165) (0.190) (0.189) (0.161) Process_sum *** *** (0.568) (0.596) Retrofit_sum *** *** (0.584) (0.562) PurchaseFor_sum *** *** (0.964) (0.833) PurchaseDom_sum *** *** (0.419) (0.352) 13

14 China Energy Efficiency Policy Research Design Econometric Model Data Results Conclusion Results for differential responses to Target and Electricity price by different firms 14

15 China Energy Efficiency Policy Research Design Econometric Model Data Results Conclusion 2.1 Mandatory Target are More Effective for Firms under Supervising of State, Provincial, City or County Authority. (1) (2) (3) (4) VARIABLES Efficiency Efficiency Efficiency Efficiency Target_Author ** * ** * (0.182) (0.175) (0.181) (0.177) Target *** ** *** ** (0.163) (0.157) (0.158) (0.154) E_Price_Author (0.278) (0.272) (0.276) (0.272) E_Price *** *** ** ** (0.257) (0.251) (0.259) (0.255) Material1_Price (0.087) (0.084) Material2_Price (0.093) (0.094) 15

16 China Energy Efficiency Policy Research Design Econometric Model Data Results 2.2 Target is more Effective on Firms with Nonfavorable economic condition (1) (2) (3) (4) VARIABLES Efficiency Efficiency Efficiency Efficiency Target_Unfavor *** *** *** *** (0.137) (0.135) (0.133) (0.131) Target *** *** *** *** (0.095) (0.096) (0.096) (0.098) E_Price_Unfavor (0.188) (0.186) (0.186) (0.185) E_Price *** *** *** *** (0.115) (0.114) (0.114) (0.113) Material1_Price (0.088) (0.086) Material2_Price (0.095) (0.095) Conclusion Firms with Non-favorable economic conditions have not enough money to improve energy efficiency. When mandatory target are imposed on them, they are more sensitive or responsive to target. 16

17 China Energy Efficiency Policy Research Design Econometric Model Data Results Conclusion Conclusions 1. Mandatory Targets and Electricity Price are significant drivers on improving energy efficiency 2. In firm level, the effective channels appear to be through internal R&D and expenditure (investment) on Energy saving, including Optimizing manufacturing process, Retrofitting Aged machine and purchasing domestic/foreign equipment 3. The effects of firm-level internal R&D and investment are additive by years instead of short term 4. Mandatory target is more effective for firms under supervising of State, Provincial, City or County level Energy Saving Agency 5. Firms with better financial are more likely to react to the mandatory target, to engage in energy efficiency improvement activities 6. Other Characteristics: firm size, technology progress potential, ownership, incentives and penalty 17

18 China Energy Efficiency Policy Research Design Econometric Model Data Results Conclusion Policy Implications If the government would like firms to improve energy efficiency through purchasing foreign equipment (which could also mean an upgrade in production and improvement in production efficiency), the government should use electricity price instead of target. A firm under some government supervision is more responsive to the target. Target is more effective for enterprises with unfavorable economic conditions and greater difficulty in energy efficiency improvement Chen-Hao Tsai 30th USAEE/IAEE North American Conference Page 18

19 Questions and Suggestions? Thank you! 19

20 Endogeneity of Target and Electricity Price? Chen-Hao Tsai 30th USAEE/IAEE North American Conference Page 20

21 Unlikely Endogeneity! VARIABLES Target Electricity_Price Efficiency (0.569) (0.980) Output ** (0.001) (0.004) Profit (0.008) (0.008) Electricity Consumption (0.080) (0.161) Energy_Saving_Cost *** (0.008) (0.010) Management_Inefficiency (0.300) (0.454) Tech (0.007) (0.011) Favor (0.009) (0.016) Constant ** *** (0.032) (0.048) R-squared Chen-Hao Tsai 30th USAEE/IAEE North American Conference Page 21