LAUSR

China has launched energy quota right trading system, as one of the sustainable operations, since 2016 to cap the total energy consumption, however the economic and energy saving effect of this new policy is unclear. Based on the input and output panel data of China’s 29 manufacturing sub-industries, this paper constructs the non-parametric optimization model under the command-and-control and the energy quota right trading scenario, to compare their potential economic gains and energy savings of these two polices for Chinese manufacturing industries. Results show that, whether at overall level or at the sub-industries level, the economic potential and energy-saving potential from energy quota right trading are higher than those from command-and-control. However, a part of energy-saving potential will be squeezed out due to the negative externality of the energy market trading. We suggest the well integration of both command-and-control and the market mechanism to achieve a Win–Win development.