Abstract
New energy strategies are crucial to address energy and environmental issues, but the energy consumption transition may also affect firm behavior with unintended economic consequences. Using data from A-share listed companies from 2010 to 2019, this paper investigates the impact of energy consumption structure transformation on firms' total factor productivity (TFP) using China's new energy demonstration city (NEDC) policy as a shock. It is found that the NEDC reduces firms' TFP by about 6.4%. This conclusion still holds after a series of robustness and endogeneity tests. According to the channel analysis, NEDC reduces the efficiency of firms' resource allocation and innovation, resulting in efficiency losses. Furthermore, differences in firms' ownership and geographical location make the impact of NEDC on TFP heterogeneous. For example, the hindering effect of NEDC on TFP is more pronounced in private firms and firms in regions with lower marketization. This paper shows that the promotion and application of new energy may have certain economic costs. To better balance the benefits and costs of new energy strategies, the government and other relevant departments should increase policy flexibility and perfection.