Do Subsidies to Green Technical Change Reduce Carbon Emissions? Evidence from French Manufacturing Firms.

Paul Dutronc-Postel

Abstract : We study a one-billion-euro investment subsidy program aimed at fostering biomassbased energy adoption in manufacturing. Leveraging rich data on eleven cohorts of subsidized projects, we show that subsidies cause clean investment to increase, fossil fuel consumption to decrease and biomass consumption to increase. Yearly plant-level CO2 emissions decrease by 31 %, while activity remains unchanged. Because some beneficiaries are part of the EUETS, aggregate gains from the program are lower; overall, an abated ton of CO2 costs between 22 and 66 euros. Many selected projects are eventually abandoned, which can partly be explained by energy price shocks.