Exploring the influence of extreme heat on corporate energy efficiency

Xiaojuan Hou and Ruojun Xiang

Journal of Asian Economics, 2025, vol. 97, issue C

Abstract: This paper aims to assess how extreme heat affects the energy efficiency of enterprises. By using the samples of industrial enterprises in China from 2001 to 2009, our findings indicate that with each unit rise in standardized temperature, the energy efficiency of enterprises improves by 0.2 %. This scenario can reduce the energy cost of an enterprise by 52,434 yuan. Our estimates provide robust evidence even after addressing endogeneity issues such as firm relocation. Furthermore, we find that in regions with higher levels of economic development, firms facing greater financing constraints, low-energy-consuming firms, and large-scale enterprises experience a positive impact of extreme heat on energy efficiency. Mechanism analysis demonstrates that extreme heats can promote capital renewal, production process innovation, and energy structure restructuring, which can improve energy efficiency. In further analysis, we assess the environmental benefits brought about by the energy efficiency improvement caused by extreme heats. We also explore the factors that affecting the relationship between extreme heats and energy efficiency, with local environmental regulations, fiscal subsidies, and financial development being effective catalysts. These findings supplement the insufficient literature on the response behavior of enterprises facing extreme heats.

Keywords: climate change; energy efficiency; extreme heat; green transformation (search for similar items in EconPapers)
JEL-codes: D22 Q40 Q54 Q55 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:97:y:2025:i:c:s1049007825000235

DOI: 10.1016/j.asieco.2025.101899

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