The behavioral impacts of firm-level energy-conservation goals in China's 11th five-year plan.

Energy efficiency is one of the most effective means of curbing energy consumption and associated pollutant emissions. However, energy-saving opportunities at negative net costs, or an energy-efficiency gap, widely exist and they defy an entirely rational explanation. This paper examines the significant overperformance of energy-intensive firms against their assigned energy-conservation goals in a national program in China's 11th Five-Year plan (2006-2010). Higher energy prices can be only partially responsible for more active energy saving. Behavioral constraints are explained to cause the bounded rationality of firms on energy-efficiency investment. As our theoretical and empirical studies show, energy-conservation goals could overcome such behavioral constraints to accelerate the commercialization of energy-efficiency technologies, reduce uncertainty and hesitancy of relevant investment, facilitate the enrichment of information, and concentrate the attention of firms on energy conservation. We conclude that goal-setting could provide an effective complementary policy instrument in dealing with energy conservation in China and possibly in other parts of the world.