The effects of energy price and carbon taxation on the French manufacturing sector
Damien Dussaux  1, *@  , Arlan Brucal  2@  
1 : MINES ParisTech - PSL Research University  (CERNA (PSL))
Ministère de l'Economie, des Finances et de l'Industrie
60, boulevard Saint-Michel 75006 Paris -  France
2 : Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science  (LSE)
* : Auteur correspondant

This paper investigates the link between exogenous energy price changes and firm-level environmental and economic performance. Using a unique dataset containing firm-level data from the French manufacturing sector, we find that a 10\% increase in energy price reduces energy use by 6% and CO2 emission by 8%. We also find that the same increase in the energy price reduces employment by 2% and real output by 4\% of firms operating in energy intensive industries but has no effect on the competitiveness of firms in non intensive industries. We find some evidence that in the short-run firms clean-up through the substitution of energy for labor and capital but not through the adoption of energy saving technologies. In addition, we explore the drivers of the manufacturing-wide energy intensity. We find that (i) aggregate energy intensity of the French manufacturing sector has decreased by 60% between 2001 and 2013, (ii) the changes in manufacturing-wide energy intensity is driven by the entry of more energy efficient firms and the exit of more energy intensive firms, (iii) a large part of entry is explained by the increase in the energy price. The policy implications of this paper are illustrated with a simulation of the effect of the French carbon tax on CO2 emissions and employment.

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