Barriers to increasing energy efficiency: evidence from small-and medium-sized enterprises in China

This paper analyzes financial, informational and organizational barriers to energy efficiency investments for small-and medium-sized enterprises (SMEs) in China. Its findings are based on a survey of 480 SMEs in Zhejiang province, and complemented by semi-structured interviews with enterprises contained in the survey sample. Responses reveal that only a minority of SMEs in China actively perform energy saving activities at a significant level. The survey data suggest, further, that informational barriers are the core bottleneck inhibiting energy efficiency improvements in China's SME sector. Financial and organizational barriers also influence a company's energy saving activities, with interview-based evidence stronger than statistical evidence. The interviews point out three additional barriers to energy saving activities: the role of family ownership structures, lax enforcement of government regulations and the absence of government support as well as a lack of skilled labor. More than 40% of enterprises in the sample declared themselves unaware of energy saving equipment or practices in their respective business area, indicating that there are high transaction costs for SMEs to gather, assess, and apply information about energy saving potentials and relevant technologies. One policy implication of the study is that the Chinese government could play a more active role in fostering the dissemination of energy-efficiency related information in the SME sector.