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What drives carbon emissions in German manufacturing: Scale, technique or composition?

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  • Rottner, Elisa
  • von Graevenitz, Kathrine

Abstract

Drastic emission reductions are necessary to combat climate change. However, despite several climate policies, carbon emissions from German manufacturing have actually increased between 2005 and 2017. In this paper, we provide evidence of how the policy mix overall has affected the German manufacturing sector in its entirety. Using detailed administrative micro-data at the product-level, we decompose changes in carbon emissions between 2005 and 2017 into scale, composition (changes in the mix of goods produced) and technology (emission factors of production) effects. We find that much of the increase in carbon emissions is due to an increase in manufacturing's production scale. Relative to the strong output growth, our analysis reveals a clean-up of manufacturing of 9 %. This clean-up is exclusively due to a shift towards a cleaner product composition from 2011 onwards, while production technique has mostly become dirtier. The results display substantial sectoral heterogeneity and are largely driven by the most energy and emission intensive sectors.

Suggested Citation

  • Rottner, Elisa & von Graevenitz, Kathrine, 2022. "What drives carbon emissions in German manufacturing: Scale, technique or composition?," ZEW Discussion Papers 21-027, ZEW - Leibniz Centre for European Economic Research, revised 2022.
    • Handle: RePEc:zbw:zewdip:21027
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    References listed on IDEAS

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    Cited by:

    1. Sabine Stillger, 2025. "The Role of Firm Heterogeneity and Intermediate Inputs in Carbon Leakage," CRC TR 224 Discussion Paper Series crctr224_2025_670, University of Bonn and University of Mannheim, Germany.
    2. Dan Xie, 2024. "China’s Manufacturing Pollution, Environmental Regulation and Trade," FIW Working Paper series 198, FIW.
    3. Kevin Andrew & Jevan Cherniwchan & Mamoon Kader & Hashmat Khan, 2024. "Geography and the Technique Effect: Evidence from Canada," Carleton Economic Papers 24-01, Carleton University, Department of Economics.
    4. Robin Sogalla & Joschka Wanner & Yuta Watabe, 2024. "New Trade Models, Same Old Emissions?," Discussion Papers of DIW Berlin 2077, DIW Berlin, German Institute for Economic Research.
    5. Sogalla, Robin & Wanner, Joschka & Watabe, Yuta, 2024. "New trade models, same old emissions?," Kiel Working Papers 2267, Kiel Institute for the World Economy.
    6. Tiwari, Aviral Kumar & Trinh, Hai Hong & Vo, Diem Thi Hong & Sharma, Gagan Deep, 2025. "How do economies decarbonize growth under finance-energy inequality? Global evidence," Energy Economics, Elsevier, vol. 142(C).
    7. Till Köveker & Philipp M. Richter & Alexander Schiersch & Robin Sogalla, 2025. "Clean Production, Dirty Sourcing: How Embodied Emissions Alter the Environmental Footprint of Exporters," Discussion Papers of DIW Berlin 2126, DIW Berlin, German Institute for Economic Research.
    8. Polina Ustyuzhanina, 2022. "Decomposition of air pollution emissions from Swedish manufacturing," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 24(2), pages 195-223, April.
    9. Janser, Markus & Jarvis, Stephen & von Graevenitz, Kathrine & Wagner, Ulrich J., 2025. "Climate Policy, Manufacturing Competitiveness and the Decision to Exit: Evidence from Germany," VfS Annual Conference 2025 (Cologne): Revival of Industrial Policy 325466, Verein für Socialpolitik / German Economic Association.
    10. Ahmed, Irfan & Socci, Claudio & Severini, Francesca & Deriu, Stefano & Almonti, Ludovica, 2026. "Reconciling economic targets and emission abatement in China: Insights from an environmental social accounting matrix," Energy Policy, Elsevier, vol. 208(C).
    11. Watabe,Yuta & Sogalla,Robin & Wanner,Joschka, 2024. "New Trade Models, Same Old Emissions?," IDE Discussion Papers 926, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    12. Rottner, Elisa, 2025. "Zwischen internationalem Wettbewerb und Klimaschutz – die deutsche Industrie," WISTA – Wirtschaft und Statistik, Statistisches Bundesamt (Destatis), Wiesbaden, vol. 77(4), pages 106-115.

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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