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

Author

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  • M. Del Gatto
  • M. Piccari

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.

Suggested Citation

  • M. Del Gatto & M. Piccari, 2026. "Technology adoption, emission intensity and (increasing/decreasing) competitive pressure," Working Paper CRENoS 202616, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    • Handle: RePEc:cns:cnscwp:202616
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    File URL: https://crenos.unica.it/bibcite/reference/8783
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    File URL: https://crenos.unica.it/sites/default/files/2026-10/WP26-16.pdf
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    Keywords

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • 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

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