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Regulating Mismeasured Pollution: Implications of Firm Heterogeneity for Environmental Policy

Eva Lyubich, Joseph S. Shapiro, Reed Walker

NBER Working Paper No. 24228
Issued in January 2018, Revised in April 2018
NBER Program(s):Environment and Energy Economics, International Trade and Investment, Public Economics, Productivity, Innovation, and Entrepreneurship

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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Document Object Identifier (DOI): 10.3386/w24228

Published: Eva Lyubich & Joseph Shapiro & Reed Walker, 2018. "Regulating Mismeasured Pollution: Implications of Firm Heterogeneity for Environmental Policy," AEA Papers and Proceedings, vol 108, pages 136-42.

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