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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Damien Capelle, Divya Kirti, Nicola Pierri, and German Villegas Bauer. Mitigating Climate Change at the Firm Level: Mind the Laggards, (USA: International Monetary Fund, 2023) accessed November 21, 2024

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

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.

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

Pages:

81
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/242
Stock No:

WPIEA2023242
ISBN:

9798400258541
ISSN:

1018-5941

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