Corporate Preferences for Domestic Policy Instruments Under a Sectoral Market Mechanism: A Case Study of Shanxi Province in China

Abstract

Understanding companies’ preferences for various domestic policy instruments is crucial to designing and planning Sectoral Market Mechanism (SMM) in China. Based on a detailed overview of domestic policy instruments under SMM, this paper evaluates corporate preferences for diverse domestic policy instruments and identifies potential influencing factors through econometric analysis. The data were collected from 113 respondents in all 11 prefecture-level cities of Shanxi province, China. Regarding policy instruments under the system of government receiving tradable units, corporate energy saving potential, learning capacity and companies’ characteristics have shown significant influences on companies’ preferences. Dissemination and the popularization of knowledge are also important to help companies learn how to improve energy efficiency. In terms of policy measures with voluntary installation-level targets, corporate competition level, organizational size and ownership are the main factors influencing companies’ preferences. Reducing inequality in the distribution of responsibility is especially important to gain companies’ support. Under the policy with mandatory installation-level targets, it suggests that policymakers should focus on status of energy use management and internationalization orientation. Policy instruments familiar to companies that are able to relieve corporate financial pressures might be good options to gain higher acceptance. Moreover, our results show that it is very important to choose an issuance frequency of one to three years under sectoral crediting.