Does China's carbon regulatory policy improve total factor carbon efficiency? A fixed-effect panel stochastic frontier analysis

Xiujie Tan, Yongrok Choi, Banban Wang and Xiaoqi Huang

Technological Forecasting and Social Change, 2020, vol. 160, issue C

Abstract: In China, climate policy has been strengthened by the mandated carbon intensity reduction target, which is a simple measurement of carbon efficiency under the single-factor framework. Is this carbon regulation during the 12th Five-Year Plan (FYP) actually effective for total factor carbon efficiency (TFCE) in China? To answer this research question, we estimate the TFCE and its policy and economic drivers using the fixed-effect stochastic frontier approach. The main results are as follows. First, the TFCE shows time and sector heterogeneity ranging from 0.235 to 0.996. Moreover, the changing pattern implies a positive relationship between TFCE and the 12th FYP. Second, the implementation of carbon regulations during the 12th FYP not only helped meet the carbon intensity reduction target, but also assisted in effectively improving TFCE. Third, carbon regulations have positively enhanced the role of energy prices in TFCE promotion and alleviated the negative role of exports. The results have significant policy implications for the carbon regulations in China's forthcoming 14th FYP. It is necessary to introduce market-oriented tools aside from the existing command-and-control policies.

Keywords: Carbon efficiency; Industrial sub-sectors; Fixed-effect panel stochastic frontier analysis; Total factor carbon efficiency (search for similar items in EconPapers)
JEL-codes: C51 D24 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:160:y:2020:i:c:s0040162520310489

DOI: 10.1016/j.techfore.2020.120222

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