Do Firms That Are Disadvantaged by Unilateral Climate Policy Receive Compensation? Evidence from China’s Energy-Saving Quota Policy

Inequities caused by a unilateral climate policy may threaten the sustainability of CO2 emission reduction efforts countries and firms, thus endangering sustainable development for humans eco-environment. However, few studies have conducted ex-post evaluations on whether environmentally regulated firms receive external compensation such as subsidies, tax reductions, loan support. Thus, this study investigates experiencing inequitable conditions under China’s Energy-Saving Quota Policy (ESQP) are financially compensated. It develops balanced panel data from 6189 ESQP-regulated unregulated 2010 to 2013, combines probit model with difference-in-differences method conduct empirical analysis. The results show that more subsidy income lower rates than firms. Of companies higher energy-saving burdens larger subsidies financial expense ratios those burdens. Additionally, complete their quotas compensated and/or fail them. Finally, state-owned private ones. Unlike trading schemes implemented worldwide formulate an exemption mechanism (i.e., free or over-allocated allowances), ESQP does not exempt responsibilities. Rather, greater amount in exchange reductions energy consumption.