Green Investment by Firms: Finance or Climate Driven?

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Rising energy prices and productivity: short-run pain, long-term gain?

“…It may also lead to improvements in operation and process reliability, with an impact on productivity (IEA, 2019 [20]). Recent evidence seems to support this (Kalantzis and Niczyporuk, 2021 [21]; Filippini et al, 2020[22]). As it tends to be more efficient, new capital is also predicted to enhance total factor productivity through capitalembodied technical progress (Solow, 1960 [23]; Benhabib and Rustichini, 1991[24]).…”

“…This control is found to be necessary to avoid a downward 20 Table B.5 shows that our findings are qualitatively unchanged when using twice lagged MFP or average MFP in the sample in place of lagged MFP, reducing potential concerns that feedback effects between productivity and energy prices are driving our findings. 21 Energy price shocks could affect business dynamism also through the extensive margin. However, due to data limitations, the direct investigation of these effects is beyond the scope of this paper.…”