Lyubich, Eva, Shapiro, Joseph, and Walker, Reed “Regulating Mismeasured Pollution: Implications of Firm Heterogeneity for Environmental Policy” (January 2018) (Revised version published in AEA Papers and Proceedings, 108: 136-42, 2018) | WP-286R
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.