Thibault Ingrand: Quantifying the Energy Transition: Evidence from Firm-Level Data in France

According to the Intergovernmental Panel on Climate Change (IPCC), energy efficiency, together with electrification and the development of renewable energies, are the key levers for CO2 emissions reduction. The efficiency of public policies to achieve the net-zero emissions target will critically depend on the speed at which technological progress develops in these three directions. The aim of this project is to study the evolution of CO2 emissions in the manufacturing sector over the last 30 years in France and quantify the contribution of these three components, as well as the role played by the undergoing deindustrialization.

Background

The aim of this project is to study the evolution of CO2 emissions in the manufacturing sector over the last 30 years in France, trying to disentangle the effect of technical change from the undergoing deindustrialization. In particular, reductions in emissions from the manufacturing sector in France could be coming from the relocation of most polluting activities to foreign countries and not from technical progress.

More precisely, my co-author and I aim to decompose emissions reduction in the manufacturing sector into the five following components: (i) increase of the share of renewable energy in total energy production; increase of firms’ average energy efficiency either coming from (ii) technical change at the firm level or (iii) reallocation of production towards most energy efficient firms; increase of the share of electricity in the energy mix of firms either coming from (iv) electrification at the firm level or (v) reallocation of production towards the firms with the highest electricity share.

Summer work insights

Thanks to The Europe Center’s Graduate Student Grant, I was able to visit the Observatoire français des conjonctures économiques (OFCE) in Paris over the summer. There, I could access confidential firm-level data on financial and production outcomes, as well as energy consumption. This data is produced by the Institut national de la statistique et des études économiques (Insee) and the secured access service is provided by the Centre d’accès sécurisé aux données (CASD).

Firm-level financial data is coming from the FARE and FICUS datasets, which cover the universe of firms in France since 1994. Establishment-level energy consumption is coming from the EACEI survey, which covers a sample of the manufacturing sector in France every year since 1983.

My work this summer has mostly consisted of building the appropriate dataset for the exercise described above. The first step consisted of imputing establishment-level energy consumption for all establishments from the surveyed population. Then, I collapsed this establishment-level data to the firm level, to be able to merge the energy consumption data with the firm-level financial data. I obtained a unique firm-level panel dataset on financial performance and energy consumption, with a breakdown by energy type, covering the period 1994 to 2018.

Once the dataset was built, my co-author and I were able to conduct some preliminary analysis. We have uncovered the following facts: (i) there is important heterogeneity in energy efficiency and electrification across firms of the same sector; (ii) energy efficiency has been going up and the share of electricity in total energy use has been going up, on average, over the studied period, (iii) there is early evidence that this decline is driven both by energy efficiency improvements (resp. electrification) within firms and reallocation of production towards most energy efficient (resp. most electrified) firms.

Overall, my summer stay in France enabled me to make significant progress on data work, allowing me to construct a unique dataset on energy consumption within France’s manufacturing sector and generate early-stage results. This achievement would not have been possible without the Europe Center, and I wish to express my deepest gratitude for their support. I look forward to advancing this project with my co-author and sharing our findings with Stanford’s community.