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Emission intensity and firm dynamics: reallocation, product mix, and technology in India

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  • Geoffrey Barrows
  • Helene Ollivier

Abstract

We study how market conditions shape aggregate CO2 emission intensity from manufacturing. We first develop a multi-product multi-factor model with heterogeneous firms, variable markups, and monopolistic competition in which each product has a specific emission intensity. Competition affects output shares across heterogeneous firms, product-mix across heterogeneous products, and technological choice within firm-product lines. We find that increased competition shifts production to cleaner firms, but has ambiguous effects on withinfirm changes in emission intensity via product-mix and technology adoption. Next, using detailed firm-product emission intensity data from India, we find core-competency products tend to be cleaner than non-core products; but since market conditions have induced Indian firms to shift production away from core-competency, product-mix has increased CO2 emission intensity in India by 49% between 1990-2010. These emission intensity increases are offset by reductions within firm-product lines and by across-firm share shifts, so aggregate emission intensity has actually fallen by 50%.

Suggested Citation

  • Geoffrey Barrows & Helene Ollivier, 2016. "Emission intensity and firm dynamics: reallocation, product mix, and technology in India," GRI Working Papers 245, Grantham Research Institute on Climate Change and the Environment.
  • Handle: RePEc:lsg:lsgwps:wp245
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    1. repec:eee:eecrev:v:98:y:2017:i:c:p:373-391 is not listed on IDEAS
    2. Can Askan Mavi, 2017. "Creative Destruction vs Destructive Destruction ? : A Schumpeterian Approach for Adaptation and Mitigation," Working Papers halshs-01455297, HAL.
    3. repec:anr:reveco:v:9:y:2017:p:59-85 is not listed on IDEAS
    4. M. Scott Taylor, "undated". "Trade and the Environment: New Methods, Measurements, and Results NBER Working Paper No. 22636," Working Papers 2016-46, Department of Economics, University of Calgary, revised 01 Dec 2016.
    5. Jevan Cherniwchan & Brian R. Copeland & M. Scott Taylor, 2017. "Trade and the Environment: New Methods, Measurements, and Results," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 59-85, September.

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