Publication Date:
2019
Description:
〈p〉Publication date: February 2019〈/p〉
〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 78〈/p〉
〈p〉Author(s): Robert Elliott, Puyang Sun, Tong Zhu〈/p〉
〈h5〉Abstract〈/h5〉
〈div〉〈p〉Energy is an essential input into a firm's production process. In this paper we investigate how electricity price changes across Chinese provinces affect the decision of firms to switch production from one industry to another. To address potential endogeneity between electricity prices and unobservable province level policies we construct an instrument from the interaction of regional coal production and thermal power generation capacity. Our instrumental variable results show that manufacturing firms are more likely to switch the industry of their main product to a less energy intensive industry as a result of rising electricity costs. More specifically, a 10% increase in the price of electricity leads to an increase in the probability of switching to a less energy intensive industry of around 2.3%. Our findings suggest that a well designed electricity price scheme can encourage firm behaviour than is consistent with reductions in energy use.〈/p〉〈/div〉
Print ISSN:
0140-9883
Electronic ISSN:
1873-6181
Topics:
Energy, Environment Protection, Nuclear Power Engineering
,
Economics
