Enforcement of Capacity-Differentiated Regulations in China： Evidence from Coal-Fired Power Plants

• Published in: Frontiers of economics in China Vol. 10; no. 4; pp. 604 - 628
• Main Authors: Sun, Qi, Li, Tiao, Wu, Fang
• Format: Journal Article
• Language: English
• Published: Beijing Higher Education Press 01.12.2015; Higher Education Press Limited Company
• Subjects: Analysis; Capital expenditures; Coal; Coal fired power plants; difference-in-differences; distortion effects; Effects; efficiency; electricity; Energy efficiency; Enforcement; Environmental aspects; Environmental law; environmental regulations in china; Laws, regulations and rules; Panel data; Plant capacity; Power; Regulated industries; Regulation; Shutdowns; Studies; China
• ISSN: 1673-3444; 1673-3568
• DOI: 10.3868/s060-004-015-0028-4

This article investigates the effects of the capacity-differentiated regulations that are popular in China. These regulations usually involve measures that gradually shut down small plants while allowing them to continue to operate until shutdown. We use a panel data set from coal-fired power plants during the period from 2003 to 2010 and employ the input demand equations and the difference-in-differences method to quantify the effects of these regulations. Our findings, which are robust to a variety of specifications, indicate that regulations of this type reduce capital spending and fuel efficiencies in the vulnerable small plants that are subject to shutdown under this regulation. We find no effect on the operating expenses of these small plants.