Regulating Mismeasured Pollution: Implications of Firm Heterogeneity for Environmental Policy
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.
We thank our discussant Matilde Bombardini, Nate Aden, Jevan Cherniwchan, Sharat Ganapati, Sam Kortum, Arthur van Benthem, and Katherine Wagner for useful comments, and Matt Fiedler for sharing code. Shapiro thanks NSF SES-1530494 and a Yale Weyerhaeuser Research Grant for generous support. All results have been reviewed by the U.S. Census Bureau to ensure that no confidential information is disclosed. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Joseph S. Shapiro
I have no relevant or material financial interests that relate to the research described in the paper. I gratefully acknowledge additional financial support from the Alfred P. Sloan Foundation, the Department of Energy, and the National Science Foundation.
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. citation courtesy of