Journal of Productivity Analysis

, Volume 42, Issue 3, pp 355–366 | Cite as

How does a firm’s management of greenhouse gas emissions influence its economic performance? Analyzing effects through demand and productivity in Japanese manufacturing firms

  • Kimitaka Nishitani
  • Shinji Kaneko
  • Satoru Komatsu
  • Hidemichi Fujii
Article
First Online:

Abstract

This paper analyzes how a firm’s management of greenhouse gas (GHG) emissions affects its economic performance. The theoretical model we derive from Cobb–Douglas production and inverse demand functions predict that in conducting GHG emissions management, a firm will enhance its economic performance because it promotes an increase in demand for its output and improves its productivity. The estimation results, using panel data on Japanese manufacturing firms during the period 2007–2008, support the view that a firm’s GHG emissions management enhances a firm’s economic performance through an increase in demand and improvement in productivity. However, the latter effect is conditional. Although a firm’s efforts to maintain lower GHG emissions improves productivity, efforts to reduce GHG emissions further does not always improve it, especially for energy-intensive firms. Because firms attempting to maintain lower GHG emissions are more likely to improve their productivity, there is a possibility that firms with high GHG emissions can also enhance economic performance by reducing their emissions in the long term, even if additional costs are incurred. In addition, better GHG emissions management increases the demand of environmentally conscious customers because a product’s life cycle GHG emissions in the upper stream of the supply chain influence those in the lower stream, and customers evaluate the suppliers’ GHG emissions management in terms of green supply-chain management.

Keywords

Greenhouse gas emissions management Economic performance Increase in demand Improvement in productivity Random-effects instrumental variables model 

JEL Classification

C36 M20 Q56 
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Notes

Acknowledgments

This study was conducted as part of the contract research program “Policy studies of environmental economics” by the Japanese Ministry of the Environment during the period 2009–2011. The authors would like to thank anonymous reviewers for their valuable suggestions and comments on an earlier version of this paper. The usual disclaimer applies.

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Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  • Kimitaka Nishitani
    • 1
  • Shinji Kaneko
    • 2
  • Satoru Komatsu
    • 3
  • Hidemichi Fujii
    • 4
  1. 1.Research Institute for Economics and Business AdministrationKobe UniversityKobeJapan
  2. 2.Graduate School for International Development and CooperationHiroshima UniversityHigashi-HiroshimaJapan
  3. 3.School of Global Humanities and Social ScienceNagasaki UniversityNagasakiJapan
  4. 4.Graduate School of Fisheries Science and Environmental StudiesNagasaki UniversityNagasakiJapan

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