Exporters and Energy Efficiency: Evidence from Chilean Firms, with Ziba Karjoo
Abstract
We explore how exporting affects energy consumption. One concern about international trade is its impact on the environment: when a firm exports more, it expands its output, increasing pollution. This concern would be mitigated if exporters use “cleaner” technologies than non-exporters. Using Chilean data, we investigate whether exporting drives firms to substitute fuel, a dirty technology, for electricity, a clean technology. While we do not find a significant difference when comparing exporters and non-exporters, we find strong evidence of shifts away from fuel and towards electricity when firms start to export. Exporters increase the share of electricity in variable costs by 1% starting two years before entering the export market and keep increasing it for the next two years. Via a matching exercise on propensity scores and the difference-in-differences method, we identify a causal link between export entry and the type of energy use: starting to export increases the cost share of electricity use by 1% and reduces the share of fuel use by 2% relative to non-exporters. Non-exporters catch up about two years later, suggesting that exporting accelerates the decision to adopt cleaner technology by two years, and explaining the lack of significant effects in the cross-section.
[paper]
We explore how exporting affects energy consumption. One concern about international trade is its impact on the environment: when a firm exports more, it expands its output, increasing pollution. This concern would be mitigated if exporters use “cleaner” technologies than non-exporters. Using Chilean data, we investigate whether exporting drives firms to substitute fuel, a dirty technology, for electricity, a clean technology. While we do not find a significant difference when comparing exporters and non-exporters, we find strong evidence of shifts away from fuel and towards electricity when firms start to export. Exporters increase the share of electricity in variable costs by 1% starting two years before entering the export market and keep increasing it for the next two years. Via a matching exercise on propensity scores and the difference-in-differences method, we identify a causal link between export entry and the type of energy use: starting to export increases the cost share of electricity use by 1% and reduces the share of fuel use by 2% relative to non-exporters. Non-exporters catch up about two years later, suggesting that exporting accelerates the decision to adopt cleaner technology by two years, and explaining the lack of significant effects in the cross-section.
[paper]