Do manufacturing plants respond to exogenous changes in electricity prices? Evidence from administrative micro-data

Kathrine von Graevenitz and Elisa Rottner

No 22-038, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Climate policy often implies increasing energy prices. Due to incomplete regulation across the globe, concerns about their competitiveness and employment effects play an important role in the policy debate. Using micro-data on electricity network charges and the official census data for Germany, we study the impact of rising electricity costs on plant performance in German Manufacturing. Electricity network charges are determined through regulation in Germany and therefore exogenous to manufacturing plants, while making up a substantial share of final electricity prices. Our estimates imply a negative own-price elasticity of electricity of -0.4 to -0.6 in the short-run: A one cent increase in average network charges leads to a decrease in electricity procurement of roughly 3 %. There is suggestive evidence that this elasticity of response is decreasing over time, in line with nonlinearly increasing marginal abatement costs. Generally, we do not find significant effects on revenues, investments or capital stocks.

Keywords: Network charges; Electricity Use; Firm Performance; Climate Policy; Manufacturing (search for similar items in EconPapers)
JEL-codes: D22 L60 Q41 Q48 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-ene, nep-eur and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:22038

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