Emission intensity and firm dynamics: reallocation, product mix, and technology in India

Geoffrey Barrows and Hélène Ollivier

No 245, GRI Working Papers from Grantham Research Institute on Climate Change and the Environment

Abstract: We study how market conditions shape aggregate CO2 emission intensity from manufacturing. We first develop a multi-product multi-factor model with heterogeneous firms, variable markups, and monopolistic competition in which each product has a specific emission intensity. Competition affects output shares across heterogeneous firms, product-mix across heterogeneous products, and technological choice within firm-product lines. We find that increased competition shifts production to cleaner firms, but has ambiguous effects on withinfirm changes in emission intensity via product-mix and technology adoption. Next, using detailed firm-product emission intensity data from India, we find core-competency products tend to be cleaner than non-core products; but since market conditions have induced Indian firms to shift production away from core-competency, product-mix has increased CO2 emission intensity in India by 49% between 1990-2010. These emission intensity increases are offset by reductions within firm-product lines and by across-firm share shifts, so aggregate emission intensity has actually fallen by 50%.

Date: 2016-06
New Economics Papers: this item is included in nep-bec, nep-com, nep-eff, nep-ene, nep-env and nep-tid
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Citations: View citations in EconPapers (15)

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