Determinants of Energy and CO2 Emission Intensities: A Study of Manufacturing Firms in India

This paper investigates the determinants of energy and emission intensities of manufacturing firms in India, from 2000 to 2014. Given that Indian manufacturing sector is one of the world’s most polluting sectors in terms of CO2 emissions; we arrive at firm level determinants of energy and carbon dioxide emission intensities from consumption of three primary sources of energy, namely (1) Coal, (2) Natural Gas and (3) Petroleum. Based on the methodological argument by Barrows and Olliviery (2014), we employ two different definitions in calculating energy intensity and relate with firm characteristics. Data for this study is collected from Prowess 4.0. The results of the regression analysis suggest that there are inter-firm differences in energy and emission intensity. Given that the emission coefficients are derived from the bottom-up approach, firms that are energy intensives are also found to be emission intensives. The results of the study indicate that smaller and larger firms are both energy and emission intensives compared to the medium sized firms. Similarly, firms spending more in research and development activities are found to be energy and emission efficient compare to others. Hence, in the global competitive business environment, Government of India should carefully formulate policies suitable for the medium sized firms to make them energy and emission efficient.