Does digitalization improve firm-level energy efficiency? Evidence from a quasi-natural experiment in China

Previous research has primarily focused on the influence of digitalization on regional energy efficiency, overlooking the variations in its impact on primary and secondary energy at the firm level. This study leverages a unique and extensive dataset sourced from tax records of Chinese firms to investigate the effects of digitalization on firm energy efficiency, utilizing a quasi-natural experiment revolving around the “Broadband China” policy (BCP). Employing propensity score matching (PSM-DID) to estimate the difference-in-difference model, our analysis reveals that BCP implementation leads to a 10.5% and 11.3% enhancement in coal and oil firm energy efficiency, respectively, while resulting in a 17.2% decrease in electricity firm energy efficiency. Further analysis indicates that BCP influences firm energy efficiency by fostering industrial upgrading and industrial intelligence. Moreover, government intervention magnifies the impact of BCP on firm energy efficiency. Lastly, the paper conducts various heterogeneity analyses and robustness checks. The proposed policies to enhance energy efficiency among Chinese firms are practical and could be applicable to firms in other emerging economies, particularly those experiencing rapid digital advancements.