Technology adoption, emission intensity and (increasing/decreasing) competitive pressure

M. Del Gatto and M. Piccari

Working Paper CRENoS from Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia

Abstract: This paper investigates how competitive pressure affects firms adoption of emission-efficient technologies. Using a heterogeneous-firm monopolistic competition model where technologies differ in emission intensity (i.e., per worker) and technology choice involves a trade-off between variable emission costs and fixed adoption costs, we show how, in equilibrium, tighter competition can induce firms to adopt cleaner technologies, thereby linking market selection to environmental performance. We test these predictions using balance-sheet data for European manufacturing firms paired with plant-level CO2 emissions data. Competitive pressure is operationalized through a "trade-revealed" marginal cost cutoff derived from aggregate trade flows. The emission intensity characterization of technologies is obtained via finite mixture models accounting for latent heterogeneity. The empirical findings confirm that green technology adoption significantly accelerates under intensifying market competition, particularly among front-runner firms. Thus, the efficacy of environmental regulation hinges substantially on market-level dimensions such as trade openness.

Keywords: technology adoption; emission intensity; competition effect (search for similar items in EconPapers)
JEL-codes: F12 O33 Q55 Q56 (search for similar items in EconPapers)
Date: 2026
New Economics Papers: this item is included in nep-com, nep-eur and nep-tid
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