The impact of the new energy demonstration city construction on energy consumption intensity: Exploring the sustainable potential of China's firms

As a comprehensive energy transition reform strategy, China's new energy demonstration city (NEDC) pilot policy aims to accelerate the transformation from a fossil fuel-based energy system to a more sustainable energy system. Employing unique data on firms' energy consumption from National Tax Survey Database, this paper investigates how NEDC policy affects firms' energy utilization efficiency based on the difference-in-differences model. We observe that NEDC construction reduces firms' energy consumption intensity (ECI) in the pilot cities. After using the instrumental variable approach to deal with endogeneity problems, the conclusions still hold. The mechanism analysis reveals that the decrease in firms' ECI is driven by offering more tax incentives to enterprises and prompting them to pursue technological innovation. Heterogeneity analysis shows that this negative impact is more prominent for SOEs and high-energy-consuming enterprises; we also observe that this effect is more pronounced for firms in resource-based cities and old-industrial-based cities. Our results provide policy implications for initiating policies in other countries to improve firms' energy utilization performance.