Going green while getting lean: Decomposing carbon and green total factor productivity.

While research on carbon productivity is growing rapidly, the role of structural change in green transition remains unexplored due to the scarcity of firm-level emission data. This study addresses this gap by utilizing unique register-based greenhouse gas emission data from Finland's energy-intensive manufacturing firms for 2000-2019. Applying a structural change productivity decomposition, we break down the sector's carbon productivity and green total factor productivity into four components: contributions from non-switching continuing firms, industry-switching continuing firms, the effects of entry and exit, and resource allocation. The findings highlight the important role of structural change in the sector's productivity. Non-switching continuing firms emerged as the key drivers of both carbon and green total factor productivity growth. The contribution of entry and exit was negative during the financial crisis, while inefficient resource allocation significantly hindered productivity growth throughout the study period. These findings emphasize the importance of public subsidies targeted at environmentally efficient firms to enhance their competitiveness under challenging market conditions. Furthermore, the establishment of a stable yet positive carbon price would incentivize less-productive firms to adopt environmentally friendly technologies.

Least-cost decarbonization pathways for electricity generation in Finland: A convex quantile regression approach.

This study investigates the least-cost decarbonization pathways in the Finnish electricity generation industry in order to achieve the national carbon neutrality goal by 2035. Various abatement measures, such as downscaling production, capital investment, and increasing labor and intermediate inputs, are considered. The marginal abatement costs (MACs) of greenhouse gas emissions are estimated using the convex quantile regression method and applied to unique register-based firm-level greenhouse gas emission data merged with financial statement data. We adjust the MAC estimates for the sample selection bias caused by zero-emission firms by applying the two-stage Heckman correction. Our empirical findings reveal that the median MAC ranges from 0.1 to 3.5 euros per tonne of CO2 equivalent. The projected economic cost of a 90% reduction in emissions is 62 million euros, while the estimated cost of achieving zero emissions is 83 million euros.