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The impact of renewable energy use on firm profit

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  • Hulshof, Daan
  • Mulder, Machiel

Abstract

Firms buy renewable energy at premiums and report environmental concerns as motivation to do so. The bulk of the literature on environmental corporate social responsibility suggests that this type of behavior even results in higher profit. However, a product-differentiation framework with perfect competition predicts that renewable energy use has no effect on profit. This paper tests this prediction by investigating the relationship between firms' renewable energy use and profit on the basis of panel data for 920 firms over 2014–2018. We do not find evidence for an impact of renewable energy use on profit. Hence, a ‘win-win’ in the form of higher profit and a better environment does not seem to exist. In addition, the results appear to suggest that firms do not have a positive willingness to pay for renewable energy as contribution to the environment. This implies that firms are only willing to contribute to climate-change mitigation through buying renewable energy when this is aligned with the profit-maximization objective.

Suggested Citation

  • Hulshof, Daan & Mulder, Machiel, 2020. "The impact of renewable energy use on firm profit," Energy Economics, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:eneeco:v:92:y:2020:i:c:s0140988320302978
    DOI: 10.1016/j.eneco.2020.104957
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    Cited by:

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    2. Adriana Florina Popa & Valentin Burca & Daniela Nicoleta Sahlian & Daniela Livia Trasca, 2022. "The Interaction Between Renewable Energy Consumption and the Institutional Framework from a Circular Economy-Based Perspective," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 24(61), pages 648-648, August.
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    4. Faria, João Ricardo & Tindall, Greg & Terjesen, Siri, 2022. "The Green Tobin's q: theory and evidence," Energy Economics, Elsevier, vol. 110(C).
    5. Nguyen, Quyen & Diaz-Rainey, Ivan & Kuruppuarachchi, Duminda, 2021. "Predicting corporate carbon footprints for climate finance risk analyses: A machine learning approach," Energy Economics, Elsevier, vol. 95(C).
    6. Tonmoy Choudhury & Muhammad Kamran & Hadrian Geri Djajadikerta & Tapan Sarker, 2023. "Can Banks Sustain the Growth in Renewable Energy Supply? An International Evidence," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 35(1), pages 20-50, February.

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    More about this item

    Keywords

    Renewable energy use; Environmental CSR; Profit maximization; Theory of the firm; Product differentiation;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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