The impact of energy prices on industrial investment location: Evidence from global firm level data

This study examines the influence of relative energy prices on the geographical distribution of industrial investments across 41 countries. Employing a gravity model framework to analyse firms’ investment location decisions, we estimate the model using global bilateral investment flows derived from firm-level M&A data. Our findings reveal that a 10% increase in the energy price differential between two countries results in a 3.2% rise in cross-border acquisitions. This effect is most pronounced in energy-intensive industries and transactions targeting emerging economies. Furthermore, policy simulations suggest that the impact of unilateral carbon pricing on cross-border investments is modest.

Aurélien Saussay, Misato Sato, The impact of energy prices on industrial investment location: Evidence from global firm level data, Journal of Environmental Economics and Management, Volume 127, 2024, 102992, ISSN 0095-0696, https://doi.org/10.1016/j.jeem.2024.102992.