Company's affordability of increased energy costs due to climate policies: A survey by sector in China

This paper estimates the affordability of Chinese companies on energy cost increases due to the introduction of market-based climate policies. The data were collected from 170 respondents mainly from iron and steel, cement and chemical industries, using a multiple-bounded discrete choice (MBDC) format. Estimations indicate that a mean of 8.8% in energy cost increase would be acceptable for all the samples. The chemical companies express a slightly higher affordability, with the mean of acceptable ratios of energy cost increases being 9.9%, while the cement companies show slightly lower affordability with a mean of 7.7%. Econometric analysis confirms that the market competition degree has a significant but negative relationship with the affordability while the company's size is significantly and positively associated with the affordability. Calculations indicate that the mean of affordable energy cost increases roughly equals a carbon price of 83.7 CNY/t-CO2 (about 12 USD/t-CO2) for chemical companies and around 40 CNY/t-CO2 (about 6 USD/t-CO2) for iron and steel and cement sectors. This result provides a meaningful referendum for the development of carbon tax and the establishment of a domestic carbon emissions trading scheme in China, especially from the perspective of surveyed industries.

► This paper estimates affordable climate costs of companies by sectors in China. ► The acceptable mean in energy cost increase for the sampled 170 companies is 8.8%. ► The affordable energy cost increases equal to carbon prices of 6-12 USD/t-CO2. ► Competition degree and company's size influence the cost affordability.