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Herding Cats: Firm Non-Compliance in Chinas Industrial Energy Efficiency Program

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  • Valerie J. Karplus, Xingyao Shen, and Da Zhang

Abstract

We study firm responses to a large-scale energy efficiency program in China, focusing on the quality of reporting and compliance outcomes. Using statistical methods to detect data manipulation in compliance reports, we find evidence that firms deliberately exaggerated performance during the first phase of the program (2006-2010), suggesting the high compliance rate was overstated. In its second phase (2011-2015), the number of firms in the program expanded by an order of magnitude, and the compliance rate decreased. We develop a simple model to show how the observed increase in non-compliance is consistent with reduced misreporting. Statistical tests find no evidence of manipulation in the second phase. Larger firms, especially those not controlled by the state, and firms in cities with relatively low growth were more likely to report non-compliance, which suggests a role for state control and local protectionism in shaping compliance decisions. Based on our findings, we offer several lessons for future program design.

Suggested Citation

  • Valerie J. Karplus, Xingyao Shen, and Da Zhang, 2020. "Herding Cats: Firm Non-Compliance in Chinas Industrial Energy Efficiency Program," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 1-30.
    • Handle: RePEc:aen:journl:ej41-4-zhang
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    Cited by:

    1. Steffen, Bjarne & Karplus, Valerie & Schmidt, Tobias S., 2022. "State ownership and technology adoption: The case of electric utilities and renewable energy," Research Policy, Elsevier, vol. 51(6).
    2. Qiming Yang & Jun He & Ting Liu & Zhitao Zhu, 2021. "Environmental Effects of Credit Allocation Structure and Environmental Expenditures: Evidence from China," Sustainability, MDPI, vol. 13(11), pages 1-16, May.

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    JEL classification:

    • F0 - International Economics - - General

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