The Many Channels of Firm's Adjustment to Energy Shocks: Evidence from France

Arbeitspapier

Based on firm level data in the French manufacturing sector, we find that firms adapt quickly, strongly and through multiple channels to energy shocks, even though electricity and gas bills represent a very small share of their total costs. Over the period 1996-2019, faced with an idiosyncratic energy price increase, firms reduce their energy demand, improve their energy efficiency, increase intermediate inputs imports and optimize energy use across plants. Firms are also able to pass-through the cost shock fully on their export prices. Their production, exports and employment fall. A consequence of these multiple adjustment mechanisms is that the fall in profits is either non-significant, small or specific to only the most energy intensive firms. We also find that the impact of electricity shocks has weakened over time, suggesting that only firms able to adapt their production process to energy cost shocks have survived. Importantly, when faced with large electricity and gas price increases, firms are less able to reduce their consumption. These results shed light on the mechanisms of resilience of the European manufacturing sector in the context of the present energy crisis.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 10548

Classification and Topics

• Classification: Wirtschaft ; Industry Studies: Manufacturing: General ; Energy: Demand and Supply; Prices ; Energy and the Macroeconomy
• Subject: energy crisis ; employment ; production ; competitiveness ; electricity ; gas

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Fontagné, Lionel ; Martin, Philippe ; Orefice, Gianluca
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/279298
• Last update: 23.12.2025, 9:43 PM CET