How do fuel economy standards affect product structure and technology changes? Evidence from China's firm-level data

Jingwen Xia and Zibin Zhang

Energy Economics, 2025, vol. 143, issue C

Abstract: China's national Corporate Average Fuel Consumption (CAFC) level has decreased significantly after implementing the tightened Phase IV (2016–2020) fuel economy standard. To investigate the causal effects of this tightened standard, we specify a difference-in-differences (DID) model to estimate the effects of this standard on China's traditional internal combustion engine vehicle (ICEV) manufacturers by employing firm-level data from 2013 to 2020. We find that this tightened standard does have a significant causal effect on inducing these manufacturers to reduce their CAFC by incorporating more pure electric vehicles into their product portfolios and reducing average fuel consumption in their traditional ICEVs by adopting currently available fuel-efficiency technologies. However, this tightened standard has not induced these manufacturers to implement innovation activities in fuel efficiency. This paper not only provides new empirical evidence to the growing literature on the impacts of fuel economy standards in developing countries but also sheds light on mechanisms of the impact of fuel economy standards.

Keywords: Corporate average fuel consumption; Fuel economy standards; Technology changes; Passenger vehicles (search for similar items in EconPapers)
JEL-codes: C21 O33 Q48 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:143:y:2025:i:c:s0140988325000775

DOI: 10.1016/j.eneco.2025.108254

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