Industrial agglomeration and firm energy intensity: How important is spatial proximity?

Understanding the underlying determinants of energy intensity in countries with intensive energy consumption, such as China, is essential for addressing carbon emissions and global climate change. This study investigates the impact of spatial agglomeration on manufacturers' energy consumption behaviour using large-scale firm-level data compiled from complementary data sources in China. We create a circle around each firm instead of measuring agglomeration by aggregating economic activities in a predetermined administrative unit. In this way, we accurately capture the geographic range of concentration within a specific radius. We find that refined spatial agglomeration plays a mitigating role in shaping a firm's energy intensity. Meanwhile, agglomeration economies quickly attenuate with distance when we extend the radius. Heterogeneity analysis suggests that manufacturers' energy efficiency presents a diversified pattern across ownership and trade status. These results have important implications for researchers to understand energy efficiency heterogeneity and are beneficial for policymakers.