Perform-Achieve-Trade Policy: A Case Study of Cement Industry for Energy Efficiency

India launched Perform-Achieve-Trade (PAT) scheme for selected high energy intensive industries in 2007 to induce efficient use of energy. The scheme identified most polluting firms within each industry (designated consumers) and set individual energy intensity reduction targets to be achieved during the PAT cycle 2012-2015. Firms that exceed the target will be given Energy Saving Certificates to be traded with those who under achieve. The objective of this paper is to use difference-in-differences method to analyse the effect of PAT for the Indian Cement industry. The sample period is 2005-2015. We find that EI is higher for the designated consumers than the non-designated consumers which implies that they were correctly identified. The average EI of designated consumers is found to be lower in the implementation phase of 2012-2015. The other control variables like capital intensity, size and age of the firm have expected signs. We further introduce leads and lags in the model to explore the dynamics between PAT and EI. We find that two years prior to the implementation of the policy the leads are close to zero and insignificant and thus the parallel trends assumption holds. Next we conduct two robustness checks by using different definitions of age of the firm and by using the data for non-designated consumers and size of the firm. The results are found to be robust.Length: 27 pages