The effects of voluntary action plans on energy-saving investment

An empirical study of the Japanese manufacturing sector

Makoto Sugino, Toshihide Arimura

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

This paper examines whether voluntary actions can lead to manufacturing sector investment that reduces environmental impact. Our approach relies on unique firm-level panel data. First, we investigate the effects of the Keidanren's (Japanese Business Federation) voluntary action plans (VAP) on investment in energy efficiency and environmental preservation. We also consider the type of VAP used by a firm, whether absolute or relative targets. We conclude that firms with absolute targets are more likely to invest in energy-efficiency processes than those with relative targets. Our simulation confirms that the use of absolute targets can increase investment in energy efficiency by 7%. Hence, we confirmed that voluntary action plans with absolute targets are effective in increasing investment related to energy efficiency. Second, we examine whether VAP promotes investment in low-emission processes at the expense of productive investment. We conclude that VAP promotes investment in energy efficiency and protecting the environment by reducing productive investment. Finally, our results did not verify the existence of a liquidity constraint for emission reduction investment for large firms.

Original languageEnglish
Pages (from-to)237-257
Number of pages21
JournalEnvironmental Economics and Policy Studies
Volume13
Issue number3
DOIs
Publication statusPublished - 2011 Sep
Externally publishedYes

Fingerprint

action plan
manufacturing
energy efficiency
effect
energy saving
Empirical study
Voluntary action
Manufacturing sector
Energy saving
Saving-investment
panel data
environmental impact
Energy efficiency
firm

Keywords

  • Absolute target
  • Low-emission investment
  • Policy instrument
  • Voluntary action plan

ASJC Scopus subject areas

  • Management, Monitoring, Policy and Law
  • Economics and Econometrics

Cite this

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abstract = "This paper examines whether voluntary actions can lead to manufacturing sector investment that reduces environmental impact. Our approach relies on unique firm-level panel data. First, we investigate the effects of the Keidanren's (Japanese Business Federation) voluntary action plans (VAP) on investment in energy efficiency and environmental preservation. We also consider the type of VAP used by a firm, whether absolute or relative targets. We conclude that firms with absolute targets are more likely to invest in energy-efficiency processes than those with relative targets. Our simulation confirms that the use of absolute targets can increase investment in energy efficiency by 7{\%}. Hence, we confirmed that voluntary action plans with absolute targets are effective in increasing investment related to energy efficiency. Second, we examine whether VAP promotes investment in low-emission processes at the expense of productive investment. We conclude that VAP promotes investment in energy efficiency and protecting the environment by reducing productive investment. Finally, our results did not verify the existence of a liquidity constraint for emission reduction investment for large firms.",
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