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Do firms invest in energy adaptation? And, if so, why?

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  • Cowling, Marc
  • Rahman, Syahirah Abdul
  • Yang, Huan

Abstract

This study investigates the incorporation of climate change and energy price issues in UK firms' investment decision-making processes, using a comprehensive 2023 survey representative of the UK firm population. Our findings reveal a strikingly low rate of climate change mitigation consideration, with only 13 % to 16 % of investing firms factoring these issues into their decisions. We found that firms investing in process innovation exhibit a 14.09 % higher probability of supporting energy adaptation and a 10.89 % higher likelihood of mitigating energy price impacts. While the overall consideration of climate change in investment decisions remains low, firms that do respond tend to focus on process innovation market development and plant, machinery and vehicles investments. These targeted investments may yield tangible impacts on reducing environmental footprints and energy price exposure, particularly in high energy use sectors. However, the narrow focus suggests that UK firms' capacity to significantly reduce their environmental impact may be constrained in the short term.

Suggested Citation

  • Cowling, Marc & Rahman, Syahirah Abdul & Yang, Huan, 2025. "Do firms invest in energy adaptation? And, if so, why?," Energy Economics, Elsevier, vol. 149(C).
    • Handle: RePEc:eee:eneeco:v:149:y:2025:i:c:s0140988325006036
    DOI: 10.1016/j.eneco.2025.108776
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    Keywords

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    JEL classification:

    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing

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