Firm heterogeneity in carbon productivity: evidence from representative cross-country micro data | Antoine Dechezlepretre

Antoine Dechezlepretre is a Senior Economist at Organisation for Economic Co-Operation and Development (OECD). Antoine will present the paper Firm Heterogeneity in Carbon Productivity: Evidence from Representative Cross-Country Micro Data.

Abstract

This paper explores the heterogeneity in firm environmental performance and its relationship with economic performance based on representative data from Croatia, France, Indonesia, Lithuania, and Sweden. It documents extensive firm heterogeneity in carbon productivity within narrowly defined industries, which significantly exceeds the extent of heterogeneity in labour productivity. On average, the 90th percentile firm is 24 times more carbon productive than the 10th percentile firm in the same industry, compared with five times for labour productivity. Even comparing firms producing the same 8 digit product in France, there is huge dispersion in carbon productivity. This heterogeneity has important implications for aggregate emissions: raising the carbon productivity of the least productive firms to the carbon productivity of the 25th percentile firm in their industry would reduce carbon emissions by half for the same level of output. Furthermore, a growing carbon productivity dispersion is associated with lower carbon productivity growth. Industries that are more dispersed in carbon productivity are also more dispersed in labour productivity and firms that are more carbon productive are also more labour productive, controlling for other factors. These correlations suggest that structural characteristics of both firms and industries may jointly explain both economic and environmental outcomes. Firm-level regressions show that an in energy prices causes a fall in CO2 and an improvement in CO2 productivity, without detrimental economic effects. This evidence suggests that there is a significant untapped potential of improved environmental performance and reduction in industrial emissions – by boosting the performance of unproductive firms and improving allocative efficiency – and that these improvements could be achieved without harming economic performance.

Grantham Workshops are only open to LSE researchers and alumni. If you wish to attend the workshop in person or online please sign up to our workshop mailing list.