Regulating Mismeasured Pollution: Implications of Firm Heterogeneity for Environmental Policy
August 2018
Working Paper Number:
CES-18-03R
Abstract
This paper provides the first estimates of within-industry heterogeneity in energy and CO2 productivity for the entire U.S. manufacturing sector. We measure energy and CO2 productivity as output per dollar energy input or per ton CO2 emitted. Three findings emerge. First, within narrowly defined industries, heterogeneity in energy and CO2 productivity across plants is enormous. Second, heterogeneity in energy and CO2 productivity exceeds heterogeneity in most other productivity measures, like labor or total factor productivity. Third, heterogeneity in energy and CO2 productivity has important implications for environmental policies targeting industries rather than plants, including technology standards and carbon border adjustments.
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Census of Manufactures,
Total Factor Productivity,
Bureau of Economic Analysis,
Manufacturing Energy Consumption Survey,
Environmental Protection Agency,
North American Industry Classification System
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