A comment on the adoption of energy-efficiency-measures within firms - Energy costs and firm heterogeneity

The literature has identified a number of determinants of energy efficiency measures (EEMs) in firms, such as investment costs, expected profitability, the level of information and firm size. Instead of contributing a comprehensive analysis of this sort this paper theoretically and empirically addresses two questions with important policy implications. First, it has been suggested that energy cost shares positively affect the adoption of EEMs. This is plausible from a management perspective but ignores economic reasoning. Inefficient firms will be less likely to survive as long as they face competition. The association most likely reflects sectoral differences rather than differences in individual firm efficiency. Second, I stress the starkly heterogeneous nature of EEM adoption by presenting the differential impact of firm size and energy audits by sector.