Decomposing changes in establishment‐level emissions with entry and exit

Abstract

This paper decomposes pollution releases by U.S. manufacturing establishments to show the relative importance of four establishment-level channels: entry, exit, reallocation between survivors, and within-establishment adjustment of emissions intensity.Using a panel of establishment-level output and pollution emissions to air and water for U.S. manufacturers, we decompose changes in pollution emissions into the three channels typically presented in the literature: changes in scale (output), composition (industry market share), and industry-level technique (emissions intensity). We then decompose changes due to industry-level emissions intensity into four establishmentlevel channels for three criteria air pollutants and water pollution. For volatile organic compound emissions, nearly two-thirds of the reduction in sector-level emissions intensity is due to within-establishment reductions in emissions intensity. The other third is driven by reallocation to cleaner establishments. Though the magnitudes differ, results are broadly similar for particulate matter and sulfur dioxide. Onsite releases of effluents to water exhibit a similar pattern, though the relative importance of reallocation is greater. Additionally we find that within-establishment reductions in water emissions are associated with increased transfers to offsite publicly owned treatment facilities. The heterogeneous contributions across channels suggests that the cleanup in the U.S. manufacturing sector likely has multiple sources.

Interrelationship between international trade and environmental performance: Theoretical approaches and indicators for sustainable development

“…Therefore, when less pollutant sectors grow more rapidly than the most pollutant, the composition effect positively influences the natural environment. However, while the analyses by Antweiler et al (2001), Managi et al (2009), Shapiro and Walker (2018), and Holladay and LaPlue (2021) obtain a combined positive effect, concluding that more open trade appears to be good for the environment, Cole et al (2006) suggest that the negative scale effect exceeds the positive effect of technique, which highlights that neither regulations nor technological improvements are found at the GDP growth level. Regarding the composition effect, evidence is found suggesting that energy intensive industries are subject to forces in conflict, as postulated by the factor endowment and pollution haven hypotheses.…”

“…At the microeconomic level, only two contributions analyze the decomposition of these effects. Holladay and LaPlue (2021) examine these effects in the US manufacturing sector and decompose the technique effect into four firm‐level channels: reallocation among surviving firms, entry and exit of them and within‐firms process changes. In line with the results of Shapiro and Walker (2018), this research proves that the decrease in polluting emissions in this sector is mostly due to the technical effect.…”

“…However, the greatest limitation of the indicator is its subjectivity since managers can offer information that does not correspond to reality. Other studies use secondary data from national business surveys, for example, Survey Regional Programme for Enterprise Development in Ghana (Cole et al, 2008), Swedish manufacturing census data (Forslid et al, 2018), China's Annual Survey of Industrial Firms (Mao, 2022), GreenWatch Program Ranking System in China, Vietnam Enterprise Survey (Tran, 2022), or Risk Screening Environmental Indicators database (Holladay, 2016; Holladay & LaPlue, 2021). Most of these articles only contemplate one dimension, either the use of energy or the amount of polluting emissions.…”