Analysis of carbon productivity for firms in the manufacturing sector of India

Emission estimation and carbon productivity at the firm level for India's manufacturing sector are scanty. We fill this gap by estimating CO2 emissions at the firm level and further determining the optimal and the actual trade-offs between emissions and output at the firm level. We use data from the center for Monitoring Indian Economy (CMIE) Prowess IQ, and MoEF&CC, Government of India. Between 1998 and 2019, growth in CO2 emission and output is estimated to be 3 and 9%, respectively. This indicates a case of weak decoupling for the manufacturing sector where technology, export promotion strategies, environmental taxes, energy mix at the firm level, and cap-and-trade policy are the significant determinants of carbon productivity for the sample firms in India's manufacturing sector. We conclude that improving carbon productivity is necessary for better decoupling and R&D intensity to be complemented with R&D efficiency to gain carbon productivity for the manufacturing industry. These findings are crucial for better energy and climate policy for the Indian economy.

Automated summary

There is a scarcity of research on emission estimation and carbon productivity at the firm level in India's manufacturing sector. This study fills this gap by estimating CO2 emissions and determining the trade-offs between emissions and output. The findings show a weak decoupling between emissions and output, with technology, export promotion strategies, environmental taxes, and energy mix being significant determinants of carbon productivity. Improving carbon productivity is necessary for better decoupling, requiring increased R&D and efficiency.