Kiel Working Papers, Kiel Institute for World Economics
No 1833:
Carbon Efficiency, Technology, and the Role of Innovation Patterns: Evidence from German Plant-Level Microdata
Sebastian Petrick
Abstract: We describe the determinants of energy intensity, carbon
intensity, and CO2 emissions in the German manufacturing sector between
1995 and 2007, applying the LMDI index decomposition technique not to
aggregate but to micro data. We trace back changes in total CO2 emissions
from manufacturing to changes in activity level, structural change between
sectors, structural change within sectors, energy intensity at the firm
level, fuel mix, and emission factors. We use a firm data set on energy use
from the AFiD-Panel on German manufacturing plants that allows us to
analyze energy use at the firm level with unprecedented accuracy. Our
results show that heterogeneity among firms within one sector is a driver
of energy intensity, carbon intensity, and CO2 emissions. By stressing the
importance of competition between firms for energy efficiency improvements,
we highlight a factor that has so far been widely ignored. Firm
heterogeneity has so far rarely included in index decomposition analyses.
Contrary to wide-spread beliefs, energy intensity improvements at the firm
level do not play a significant role in reducing emissions. Based on
findings from the decomposition analysis, we use sector-level results on
the relative importance of improvements in firm-level energy intensity and
intra-sectoral structural change to distinguish two different innovation
channels: innovation by technology and by entrants. We show that incumbent
firms in a number of sectors, including some of the most energy intensive
ones, do not significantly improve their energy efficiency. Innovation
takes place via new entrants instead, rendering standard policies targeted
at firm-level energy efficiency ineffective
Keywords: Index decomposition, industrial energy, energy intensity, carbon intensity, structural change; (follow links to similar papers)
JEL-Codes: Q40,; Q41; (follow links to similar papers)
23 pages, February 2013
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