Technological Change and Energy Efficiency in Large Chinese Firms

Technological changes will influence the extent to which China can reduce its energy consumption and carbon emissions without hampering economic development. Based on data of 580 firms in the Top-1000 Enterprise Energy Saving Program during 2006 and 2009, we differentiate between technological change embodied in new production capital and disembodied technological change. We find that both types of changes clearly led to energy efficiency. Firms of domestic ownership and higher profit were more prone to making investment with embodied technological changes. Energy efficiency rates associated with embodied technological change were higher among younger firms and those with more intensive use of energy. Energy saving associated with disembodied technological change was higher in firms of state or foreign ownership, larger scale, orientation toward domestic market, and more intensive use of energy. The findings call for the need to carefully consider the effect of different policy instruments in energy saving, and to track long-term energy statistics at the micro-level.