Market supervision, innovation offsets and energy efficiency: Evidence from environmental pollution liability insurance in China

• Published in: Energy policy 2022-12, Vol.171, p.113267, Article 113267
• Main Authors: Lyu, Chaofeng, Xie, Zhe, Li, Zhi
• Format: Article
• Language: English
• Subjects: Energy efficiency; Environmental pollution liability insurance; Environmental regulation; Innovation offsets; Market supervision
• ISSN: 0301-4215; 1873-6777
• DOI: 10.1016/j.enpol.2022.113267

With the sustained expansion of energy demand, the energy crisis gradually become the core concern of society. Improving energy efficiency (EE) is crucial for saving energy and reducing emissions while ensuring economic growth. Environmental regulation is an effective tool to improve EE and environmental quality. This study introduces market supervision to further explore the impact of environmental regulation on EE. Taking environmental pollution liability insurance (EPLI) implemented in China as a quasi-natural experiment, we construct a time-varying difference-in-differences (DID) model to investigate the impact of EPLI on EE and conduct a series of robustness tests. Results indicate that the implementation of EPLI significantly improves EE, and the results of staggered DID are consistent with our findings. Further, heterogeneity analysis shows that the effect of market supervision will be affected by marketization degree and enterprise characteristics. Mechanism analyses indicate that increasing investment is an effective way for market supervision to realize “innovation offsets”. The evidence of the new relationship between market supervision and EE in this paper will provide a new perspective to formulate policies for policymakers. •Market supervision policy significantly improved enterprise energy efficiency.•The heterogeneity of region, enterprise scale and marketization degree will affect the policy effect.•The “Porter hypothesis” is still valid after the introduction of market supervision.•Increasing investment is the main way for market supervision to realize “Innovation offsets”.