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Firm's reduction of greenhouse gas emissions and economic performance: analyzing effects through demand and productivity

Author

Listed:
  • Kimitaka Nishitani

    (Graduate School for International Development and Cooperation, Hiroshima University)

  • Shinji Kaneko

    (Graduate School for International Development and Cooperation, Hiroshima University)

  • Satoru Komatsu

    (Graduate School for International Development and Cooperation, Hiroshima University)

  • Hidemichi Fujii

    (Graduate School of Environmental Studies, Tohoku University)

Abstract

This paper analyzes how a firm fs reduction of its greenhouse gas (GHG) emissions affects its economic performance. The theoretical model used is derived from the Cobb-Douglas production function and the inverse demand function, and predicts that in reducing its GHG emissions, a firm will increase its value added because it promotes an increase in demand for its output and improves its productivity. The estimation results, using data on Japanese manufacturing firms, suggest that the reduction of GHG emissions increases a firm fs economic performance only through an increase in demand. Thus, firms can improve their overall economic performance because increased demand accompanies their reduction of GHG emissions, even if they cannot achieve this through an improvement in productivity, as estimates here support the traditional view that reducing GHG emissions imposes additional costs on firms.

Suggested Citation

  • Kimitaka Nishitani & Shinji Kaneko & Satoru Komatsu & Hidemichi Fujii, 2011. "Firm's reduction of greenhouse gas emissions and economic performance: analyzing effects through demand and productivity," IDEC DP2 Series 1-1, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).
    • Handle: RePEc:hir:idecdp:1-1
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    File URL: http://ir.lib.hiroshima-u.ac.jp/files/public/31636/20141016182116634025/IDEC-DP2_01-1.pdf
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    Cited by:

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    2. Kimitaka Nishitani & Munehiko Itoh, 2014. "Product Innovation in Response to Environmental Standards and Competitive Advantage: A Hedonic Analysis of Refrigerators in the Japanese Retail Market," Discussion Paper Series DP2014-30, Research Institute for Economics & Business Administration, Kobe University.
    3. Kimitaka Nishitani & Katsuhiko Kokubu, 2014. "Corporate Environmental Initiatives and Shareholder Value: Focusing on the Role of Environmental Information and Its Credibility," Discussion Paper Series DP2014-34, Research Institute for Economics & Business Administration, Kobe University.

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    More about this item

    Keywords

    Reduction of greenhouse gas emissions; Economic performance; Increase in demand; Improvement in productivity; Instrumental variables model;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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