New energy industries thriving under China’s environmental pressures

The stringent environmental regulations in China could potentially be enhancing productivity in the new energy sector, research from Harbin University of Science and Technology and Edith Cowan University (ECU) has found.

Since 2006, China has been the world’s biggest emitter of carbon dioxide emissions, with 12.6 gigatons emitted and accounting for over 33% of the global emissions in 2023.

To tackle environmental degradation, China has set its dual carbon goals of reaching peak emissions by 2030 and carbon neutrality by 2060 and undertaken increasingly stringent policy measures to foster industrial restructuring and the transition to green development and high-quality sustainable growth, ECU Professor Zhaoyong Zhang said.

“Conventionally, additional environmental regulation or policy measures would mean additional costs to a firm, which could impact productivity, and this could impact on sustainable economic growth,” Professor Zhang 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 noted that a firm’s ability to respond positively to environmental regulation relied on a number of factors, including its regional placement within China, its capacity for technological innovation as well as the types of environmental regulation in place, be it mandatory, market based, or incentive based.

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

Professor Zhang noted that China’s new energy sector was particularly well placed to benefit in the more stringent environmental policy environment, as industry participants were 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.”

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