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Mitigating Climate Change at the Firm Level: Mind the Laggards
Author:
Damien Capelle
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,
Divya Kirti
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https://orcid.org/0000-0001-6636-6687
,
Nicola Pierri
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https://orcid.org/0000-0002-3120-9670
, and
German Villegas Bauer
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Series:
IMF Working Papers
Volume/Issue:
Volume 2023: Issue 242
Language:
English
Publication Date:
24 Nov 2023
DOI:
https://doi.org/10.5089/9798400258541.001
ISBN:
9798400258541
ISSN:
1018-5941
Pages:
81
Keywords:
Climate Change; Productivity; Technology Adoption; Capital Vintages; Emissions; R&D expenditure; capital vintage; management practice; emission intensity; emission Intensity; Carbon tax; Greenhouse gas emissions; Consumption; Stocks; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Using self-reported data on emissions for a global sample of 4,000 large, listed firms, we document large heterogeneity in environmental performance within the same industry and country. Laggards—firms with high emissions relative to the scale of their operations—are larger, operate older physical capital stocks, are less knowledge intensive and productive, and adopt worse management practices. To rationalize these findings, we build a novel general equilibrium heterogeneous-firm model in which firms choose capital vintages and R&D expenditure and hence emissions. The model matches the full empirical distribution of firm-level heterogeneity among other moments. Our counter-factual analysis shows that this heterogeneity matters for assessing the macroeconomic costs of mitigation policies, the channels through which policies act, and their distributional effects. We also quantify the gains from technology transfers to EMDEs.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund