Government procurement and firm energy efficiency: evidence from China

Government procurement serves as a demand-side instrument to foster economic and social sustainability; however, little empirical evidence exists regarding the correlation between government procurement and energy efficiency. By collecting government procurement order information, this study delves into the relationship between government procurement and energy efficiency using data from China's A-share listed companies from 2015 to 2022. The empirical findings suggest that government procurement is positively associated with energy efficiency, a causal relationship that remains valid after a battery of robustness checks. The stimulus effect can be achieved by attenuating financing constraints and facilitating green innovation and capacity utilization. Heterogeneity analysis indicates that government procurement has a more pronounced impact on energy efficiency for firms without political connections and those in energy-intensive industries, and regions with higher public environmental attention. In addition, continual government orders have a larger effect on energy efficiency than do sporadic orders. This study has implications for improving the effectiveness of government procurement and achieving sustainable development.