Management practices and manufacturing firm responses to a randomized energy audit

Abstract

Increasing the efficiency of industrial energy use is widely considered important for mitigating climate change. We randomize assignment of an energy audit intervention aimed at improving energy efficiency and reducing energy expenditures of small- and medium-sized metal processing firms in Shandong Province, China, and examine impacts on energy outcomes and interactions with firms’ management practices. We find that the intervention reduced firms’ unit cost of electricity by 8% on average. Firms with more developed structured management practices showed higher rates of recommendation adoption. However, the post-intervention electricity unit cost reduction is larger in firms with less developed practices, primarily driven by a single recommendation that corrected managers’ inaccurate reporting of transformer usage at baseline, lowering their electricity costs. By closing management-associated gaps in awareness of energy expenditures, energy audit programmes may reduce a firm’s unit cost of energy but have an ambiguous impact on energy use and climate change. New research finds that a randomized energy audit intervention reduced metal processing firms’ unit cost of electricity by 8%, primarily by informing managers that they were overpaying for electricity, and had an insignificant net effect on electricity use and associated greenhouse gas emissions.