Epsilon Open Archive

Abstract

This thesis sheds light on different aspects of the performance of Swedish industrial firms. To this end, the analysis defines and measures energy efficiency in an economic context, as well as investigating the implicit relationships between energy efficiency and other firm performance metrics – productivity and environmental performance. Paper I estimates energy efficiency using a “true” random effects stochastic frontier model. The presence of energy inefficiency indicates the potential for energy consumption reduction. Paper II includes undesirable outputs when measuring energy efficiency in a non-parametric model approach. To assess the impacts of efficiency determinants, a double bootstrap procedure is adopted for the second-stage regression analysis. Paper III investigates firm performance in three dimensions – productivity, energy efficiency, and environmental performance. A panel vector auto-regression model is utilized to examine the causal and dynamic relationships between the three dimensions of firm performance and the environmental investment. The overarching conclusion from the thesis is that there is considerable potential to improve energy efficiency in Swedish industrial firms. It is very likely that the permit price of the EU emissions trading system for CO2 and the Swedish CO2 tax rate were too low to create incentives to improve energy efficiency. A firm strategy that emphasizes energy efficiency improvements is also likely to save costs and be beneficial for overall productivity in later periods. Environmental performance comes at a cost in terms of lower productivity, and thus the results cannot corroborate the win-win outcome postulated by the so-called Porter Hypothesis.