Hunting “Brown Zombies” to Reduce Industry’s Carbon Emissions

[eng] This paper provides a first estimate of the potential greenhouse gas mitigation from the intra sector reallocation of economic activity by the European manufacturing industry away from carbon inefficient – or “brown zombie” – firms to more carbon efficient firms. Using techniques from the literature on productivity, we find a potential reduction of 38% of direct greenhouse gas emissions based on a limited reallocation of production, without the need for new technologies. According to our results, when designing emission reduction plans, in addition to focusing on improvements and innovation within existing firms, policymakers should also do more to encourage the reallocation of economic activity from “brown zombies” to more carbon‑efficient enterprises.