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Cleaner Firms or Cleaner Products? How Product Mix Shapes Emission Intensity from Manufacturing

Author

Listed:
  • Geoffrey Barrows

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique)

  • Hélène Ollivier

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique)

Abstract

We explore the contribution of product mix in determining firm and aggregate emission intensity. First, using detailed firm-product emission intensity data from India, we find that more efficient firms are less emission intensive, and that products with the largest sales tend to be cleaner than other products within the firm. We also find that emission intensity in India dropped significantly between 1990-2010 through reallocations across firms, while product mix played a counteracting role in increasing firm emission intensity. Next, we develop a multi-product multi-factor model with heterogeneous firms, variable markups, and monopolistic competition in which each product has a specific emission intensity. We find that pro-competitive market developments lead to an improvement in the aggregate emission intensity – through reallocations across firms – even though firms can become dirtier or cleaner through product mix. This theoretical result fits particularly well the empirical facts.

Suggested Citation

  • Geoffrey Barrows & Hélène Ollivier, 2018. "Cleaner Firms or Cleaner Products? How Product Mix Shapes Emission Intensity from Manufacturing," PSE-Ecole d'économie de Paris (Postprint) halshs-01630318, HAL.
    • Handle: RePEc:hal:pseptp:halshs-01630318
    DOI: 10.1016/j.jeem.2017.10.008
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    References listed on IDEAS

    as
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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F18 - International Economics - - Trade - - - Trade and Environment
    • 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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