Energy price shocks and short-time reactions of firms: The case of the german energy crisis in 2022

After the beginning of the war in Ukraine, energy prices in Germany increased drastically. The paper analyses responses of German firms to this energy price shock. A variety of measures and reactions at the firm-level are explored, such as substituting machinery and equipment by less energy consuming alternatives, a change of energy suppliers, the use of digital technologies to reduce energy consumption, the introduction of energy management systems, relocation or closure of energy intensive activities, or replacing fossil by other energy sources. The analysis is based on data from the German part of the Community Innovation Survey (CIS). The econometric results show that a high affectedness by the energy price shock in 2022 triggers the substitution of machinery and equipment by more energy efficient alternatives. This measure in turn is correlated to a decrease of electricity consumption and oil use, and it promotes the substitution of fossil energy sources by renewables. The results also show that high energy costs can lead to stopping or relocating energy-intensive activities. Furthermore, firms with high energy intensity show negative sales growth from 2022 to 2023.