China’s energy industries thrive under pressure

Edith Cowan University (ECU) has found that China’s stringent environmental regulations could potentially be enhancing productivity in the new energy sector. 

A report released in collaboration between ECU and Harbin University of Science and Technology, Environmental regulation and firm productivity: evidence from China’s new energy industry, investigated the new energy industry, a strategic industry for China, and the mechanisms through which environmental policies could affect productivity at a firm level. 

According to the report, China has seen unprecedented economic development since the launch of market-oriented reforms in late 1978, with real GDP growth averaging over 9% a year.  

However, the tremendous economic development has come at the cost of environmental degradation and ecological deterioration. As found in the report, since 2006, China has been the world’s biggest emitter of carbon dioxide emissions, accounting for over 33% of the global emissions in 2023. 

To address environmental degradation, China is targeting dual carbon goals of reaching peak emissions by 2030 and carbon neutrality by 2060 by undertaking increasingly stringent policy measures to foster industrial restructuring and the transition to green development and high-quality sustainable growth. 

ECU finance and economics Professor Zhaoyong Zhang says China’s new energy sector well placed to benefit in the more stringent environmental policy environment, as industry participants are more capable of innovation compared to the more sedimentary industries. 

“The new energy industry is driven by innovation, and technical innovation at the firm level could be the great divider in this environmental race,” he said.  

“Our research into the new energy industry, which is a strategic industry for China, investigated the mechanisms through which environmental policies could affect productivity at firm level, as well as the factors strengthening this relationship.” 

Professor Zhang and his colleagues are investigating the impacts that stringent environmental policies are having on the productivity levels of more traditional industries. 

“These findings have an important policy implication for China’s environmental protection and sustainable economic development,” Professor Zhang said. 

“Policy and incentives could potentially be adjusted between regions in order to assure that productivity remains unaffected by environmental obligations, and that economic growth continues at a sustainable pace.”