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.
ASJC Scopus subject areas
- Economics and Econometrics
- Management, Monitoring, Policy and Law