The impact of access to credit on energy efficiency

TL;DR

This study introduces a new household energy efficiency measure and finds that increased access to credit generally promotes energy efficiency improvements, despite higher energy use and emissions.

Contribution

It develops a novel household-level energy efficiency metric and empirically links expanded credit access to energy efficiency improvements in China.

Findings

Energy and carbon intensity declined from 2005 to 2019.

Energy efficiency improved over the long term.

Access to credit encourages better energy efficiency, but also increases energy use and emissions.

Abstract

This paper proposes a brand-new measure of energy efficiency at household level and explores how it is affected by access to credit. We calculate the energy and carbon intensity of the related sectors, which experience a substantial decline from 2005 to 2019. Although there is still high inequality in energy use and carbon emissions among Chinese households, the energy efficiency appears to be improved in long run. Our research further maps the relationship between financial market and energy. The results suggest that broadened access to credit encourages households to improve energy efficiency, with higher energy use and carbon emission.