IMF Working Papers

Mitigating Climate Change at the Firm Level: Mind the Laggards

By Damien Capelle, Divya Kirti, Nicola Pierri, German Villegas Bauer

November 24, 2023

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Format: Chicago

Damien Capelle, Divya Kirti, Nicola Pierri, and German Villegas Bauer. "Mitigating Climate Change at the Firm Level: Mind the Laggards", IMF Working Papers 2023, 242 (2023), accessed December 3, 2024, https://doi.org/10.5089/9798400258541.001

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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.

Summary

We document significant within-industry heterogeneity in environmental performance across firms globally and across sectors. We find that this heterogeneity is in part driven by newer capital-embedded technologies and intangible investments that raise productivity. We propose a multi-sector heterogeneous-firm general equilibrium model which endogenizes these novel determinants and matches the extent and drivers of firm heterogeneity. Calibrated simulations for several countries reveal the importance of adoption of newer capital-embedded technologies in lowering the costs of mitigation policies. We highlight the trade-off between short-term costs and long-term benefits of subsidies for capital upgrading.

Subject: Carbon tax, Consumption, Environment, Financial institutions, Greenhouse gas emissions, National accounts, Stocks, Taxes

Keywords: Capital vintage, Capital Vintages, Carbon tax, Climate Change, Consumption, Emission intensity, Emission Intensity, Emissions, Global, Greenhouse gas emissions, Management practice, Productivity, R&D expenditure, Stocks, Technology Adoption

Publication Details

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