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Energy conservation through energy service companies: Empirical analysis from China


  • Kostka, Genia
  • Shin, Kyoung


China's energy-service companies (ESCOs) have developed only modestly despite favorable political and market conditions. We argue that with sophisticated market institutions still evolving in China, trust-based relations between ESCOs and energy customers are essential for successful implementation of energy efficiency projects. Chinese ESCOs, who are predominantly small and private enterprises, perform poorly in terms of trust-building because they are disembedded from local business, social, and political networks. We conclude that in the current institutional setting, the ESCO model based on market relations has serious limitations and is unlikely to lead to large-scale implementation of energy efficiency projects in China.

Suggested Citation

  • Kostka, Genia & Shin, Kyoung, 2013. "Energy conservation through energy service companies: Empirical analysis from China," Energy Policy, Elsevier, vol. 52(C), pages 748-759.
  • Handle: RePEc:eee:enepol:v:52:y:2013:i:c:p:748-759 DOI: 10.1016/j.enpol.2012.10.034

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    References listed on IDEAS

    1. Kevin Zheng Zhou & Laura Poppo & Zhilin Yang, 2008. "Relational ties or customized contracts? An examination of alternative governance choices in China," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 39(3), pages 526-534, April.
    2. Vine, Edward, 2005. "An international survey of the energy service company (ESCO) industry," Energy Policy, Elsevier, vol. 33(5), pages 691-704, March.
    3. Wang, GuoHong & Wang, YunXia & Zhao, Tao, 2008. "Analysis of interactions among the barriers to energy saving in China," Energy Policy, Elsevier, vol. 36(6), pages 1879-1889, June.
    4. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 629-649.
    5. Andrews-Speed, Philip, 2009. "China's ongoing energy efficiency drive: Origins, progress and prospects," Energy Policy, Elsevier, vol. 37(4), pages 1331-1344, April.
    6. Price, Lynn & Wang, Xuejun & Yun, Jiang, 2010. "The challenge of reducing energy consumption of the Top-1000 largest industrial enterprises in China," Energy Policy, Elsevier, vol. 38(11), pages 6485-6498, November.
    7. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
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    Cited by:

    1. Zhang, Sufang & Jiao, Yiqian & Chen, Wenjun, 2017. "Demand-side management (DSM) in the context of China's on-going power sector reform," Energy Policy, Elsevier, vol. 100(C), pages 1-8.
    2. Pei-Chien Lin & Ming-Feng Hung, 2016. "The Effect of Energy Service Companies on Energy Use in Selected Developing Countries: A Synthetic Control Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 6(2), pages 335-348.
    3. Akman, Ugur & Okay, Esin & Okay, Nesrin, 2013. "Current snapshot of the Turkish ESCO market," Energy Policy, Elsevier, vol. 60(C), pages 106-115.
    4. Kostka, Genia, 2014. "Barriers to the implementation of environmental policies at the local level in China," Policy Research Working Paper Series 7016, The World Bank.
    5. Zhao, Xiaofan & Li, Huimin & Wu, Liang & Qi, Ye, 2014. "Implementation of energy-saving policies in China: How local governments assisted industrial enterprises in achieving energy-saving targets," Energy Policy, Elsevier, vol. 66(C), pages 170-184.
    6. repec:gam:jeners:v:11:y:2018:i:1:p:241-:d:127853 is not listed on IDEAS
    7. Lo, Kevin, 2013. "Energy conservation in China's higher educationinstitutions," Energy Policy, Elsevier, vol. 56(C), pages 703-710.
    8. Lo, Kevin, 2014. "A critical review of China's rapidly developing renewable energy and energy efficiency policies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 29(C), pages 508-516.
    9. Guangyuan Xing & Dong Qian & Ju’e Guo, 2016. "Research on the Participant Behavior Selections of the Energy Performance Contracting Project Based on the Robustness of the Shared Savings Contract," Sustainability, MDPI, Open Access Journal, vol. 8(8), pages 1-13, July.
    10. repec:gam:jsusta:v:9:y:2017:i:4:p:591-:d:95606 is not listed on IDEAS
    11. repec:eee:enepol:v:109:y:2017:i:c:p:794-806 is not listed on IDEAS
    12. Stuart, Elizabeth & Larsen, Peter H. & Goldman, Charles A. & Gilligan, Donald, 2014. "A method to estimate the size and remaining market potential of the U.S. ESCO (energy service company) industry," Energy, Elsevier, vol. 77(C), pages 362-371.
    13. Qin, Quande & Liang, Fuqi & Li, Li & Wei, Yi-Ming, 2017. "Selection of energy performance contracting business models: A behavioral decision-making approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 72(C), pages 422-433.


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