Air Pollution and Enterprise Energy Efficiency: Evidence from Energy-Intensive Manufacturing Industries in China

This study aims to investigate the causal effect of air pollution on enterprise-level energy efficiency in the energy-intensive manufacturing industries of China. To address the potential endogenous problem, it employs thermal inversions as the instrumental variable. The study finds that air pollution would significantly decrease enterprise-level energy efficiency. It shows heterogeneous influences of air pollution on enterprise-level energy efficiency, varying with enterprise ownership, enterprise age, enterprise location, and regional energy resource endowment. This study further reveals that air pollution exerts a negative influence on enterprise-level energy efficiency through the mechanisms of decreasing enterprise productivity (both total factor productivity and labor productivity), increasing enterprise total energy consumption, and lowering enterprise exports. The findings of this study provide an economic rationale for enterprises to motivate themselves to reduce air pollution and have important implications for policymaking in China and other developing countries.