- Journal Article
Summary: Few studies have empirically analyzed the performance and limitations of major energy efficiency programs at the firm level in the developing world. This study perform a detailed analysis of firm compliance behavior in a large-scale Chinese energy efficiency program, focused on the Top 1000 Enterprises Energy-Saving Program (T1000P) during the Eleventh Five-Year Plan (2006-2010) and the (expanded) Top 10000 Enterprises Energy-Saving Program (T10000P) during the Twelfth Five-Year Plan (2011-2015). Guided by a simple analytical framework to illustrate the relationship among the probability of non-compliance, the probability of data manipulation, and the perceived return to energy efficiency investments considering a profit-maximizing firm, the authors focus on two sets of characteristics. First, of firm size (measured in terms of annual revenue) and state ownership, which they theorize would have opposing effects on non-compliance, and second, of a firm’s location, such as local economic growth and per-capita GDP.
The study reports three main findings: (1) evidence that firms deliberately exaggerated performance during the first phase of the program; (2) firms’ reported compliance, while in general high, decreased significantly after the program expanded under the Twelfth Five-Year Plan; and (3) larger firms, especially larger non-state-owned firms, and firms in cities with low growth tended to fail to comply. The authors suggest that some of these findings may apply to other developing countries. They recommend that incentives and resources to support accurate reporting should be made available when a policy is introduced, and that stronger, broad-based enforcement of environmental directives, combined with mechanisms for equalizing marginal compliance costs across firms, will be important to limit non-compliance as policy stringency increases.