Industrial Investments in Energy Efficiency: A Good Idea?

48 Pages Posted: 11 Jan 2017

See all articles by Mary Li

Mary Li

University of Chicago - Department of Economics

Date Written: January 01, 2017

Abstract

Yes, from an energy-saving perspective. No, once we factor in the negative output and productivity adoption effects. These are the main conclusions we reach by conducting the first large-scale study on cogeneration technology adoption – a prominent form of energy-saving investments – in the U.S. manufacturing sector, using a sample that runs from 1982 to 2010 and drawing on multiple data sources from the U.S. Census Bureau and the U.S. Energy Information Administration. We first show through a series of event studies that no differential trends exist in energy consumption nor production activities between adopters and never-adopters prior to the adoption event. We then compute a distribution of realized returns to energy savings, using accounting methods and regression methods, based on our difference-in-difference estimator. We find that (1) significant heterogeneity exists in returns; (2) unlike previous studies in the residential sector, the realized and projected returns to energy savings are roughly consistent in the industrial sector, for both private and social returns; (3) however, cogeneration adoption decreases manufacturing output and productivity persistently for at least the next 7-10 years, relative to the control group. Our IV strategies also show sizable decline in TFP post adoption.

Suggested Citation

Li, Mary, Industrial Investments in Energy Efficiency: A Good Idea? (January 01, 2017). US Census Bureau Center for Economic Studies Paper No. CES-WP-17-05, Available at SSRN: https://ssrn.com/abstract=2897003 or http://dx.doi.org/10.2139/ssrn.2897003

Mary Li (Contact Author)

University of Chicago - Department of Economics ( email )

1126 E. 59th St
Chicago, IL 60637
United States

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