Ecological compensation for ambient air quality, legal environmental quality, and energy utilization efficiency of new energy enterprises

Article ID: 470

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Abstract

This study examines whether—and through which channels—China’s ambient air quality ecological compensation (AQEC) policy improves the energy utilization efficiency of new energy enterprises. The AQEC, piloted in selected provinces in the mid-2010s and later expanded nationwide, links intergovernmental fiscal transfers to measurable improvements in regional air quality, creating explicit incentives for local governments and regulated firms. We compile a firm-level panel dataset of 10,461 observations from 2003 to 2022, covering listed enterprises engaged in renewable power generation, energy‐efficient equipment manufacturing, and other strategic emerging industries. Using a difference-in-differences (DID) design, we find that AQEC significantly raises energy efficiency, with stronger effects for smaller firms and firms in less competitive industries. Beyond numerical gains, the results suggest that AQEC encourages firms to invest in cleaner production processes, adopt energy‐saving technologies, and strengthen environmental management systems. Mechanism analysis reveals that these improvements operate partly through enhancements in the legal environmental quality, reflecting stronger regulatory enforcement, greater transparency, and more predictable institutional support. Robustness checks—including PSM-DID, placebo testing, and entropy balancing—reinforce the credibility of our findings. By combining quantitative evidence with qualitative context on policy design, sectoral characteristics, and institutional change, this study advances understanding of how ecological compensation can promote sustainability and corporate performance in the new energy sector.