How to improve energy efficiency in China: A novel integrated approach based on resource allocation

There is a widespread consensus that optimizing resource allocation in China has significant potential to enhance energy efficiency (EE), a significant concern in achieving the goals of sustainable development. However, there is limited knowledge regarding the micro-mechanisms underlying these observed enhancements. We have developed a novel analysis framework by integrating the theories of binary margin, the dynamic Olley-Pakes method and the structure-conduct-performance paradigm. We have constructed macro and micro mechanism models to explain the evolution of energy efficiency driven by resource allocation (EEEDRA) and conducted a quantitative analysis using data from 191,615 Chinese industrial enterprises. The results show that the EEEDRA can be divided into extensive and intensive margins. The dominant factor of EEEDRA is the former, which mainly arises from the incentive and crowding-out effects of competition from industrial agglomerations; the latter primarily has a negative effect on EEEDRA due to the market segmentation effect. The micro-mechanism of the EEEDRA varies across different regions and industries due to varying levels of marketization. Policies should be flexible based on the main factors of EEEDRA at the regional and industry levels. The main focus should be on promoting the favorable effects of industrial agglomeration on energy efficiency, reshaping the boundary between government and the market, and establishing a unified national market.