Is There An Energy-Efficiency Gap? Experimental Evidence from Indian Manufacturing Plants

Résumé

Climate policy pushes energy-efficiency investments as a means to reduce energy consump- tion, and thus greenhouse gas emissions, in developing countries. I report the results of a large field experiment among energy-intensive Indian manufacturing plants that offered information and skilled labor to encourage energy-efficiency investments and practices. Treatment plants invest small amounts in recommended energy-efficiency measures; in- crease physical efficiency for some systems; increase capacity utilization across the board; hire more skilled labor; and invest more in other capital improvements. This suite of changes looks like modernization|a shift towards higher-skill, more capital-intensive plant production. The net effect of modernization on both energy consumption and productivity are roughly zero, within the precision of my estimates. Plants that become more efficient run more, which offsets any savings in energy. Similarly, treatment plants are estimated to increase sales by a large (though statistically insignificant) twelve percent, an amount offset by the higher cost of their new input mix.