This document summarizes a research paper that analyzes heterogeneity in energy expenditure and carbon productivity within industries. It finds that there is significant variation across plants within industries. This has implications for the efficiency of environmental policies that target entire industries, as they may impose disproportionate costs on some plants. The paper uses census and energy survey data to calculate productivity distributions for different industries and measures of dispersion within each industry. It concludes that energy productivity is more heterogeneous than other factors of production and open questions remain around the welfare effects of policies like carbon tariffs that do not account for within-industry differences in abatement costs.

1. Regulating Mismeasured Pollution:
Implications of Firm Heterogeneity for
Environmental Policy
A Data Deep-Dive
Eva Lyubich 1
Joseph Shapiro 2
Reed Walker 3
10 July, 2018
1
University of California - Berkeley
2
Yale University and NBER
3
University of California - Berkeley and NBER
Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of the U.S. Census
Bureau. All results have been reviewed to ensure that no confidential information is disclosed.

2. Paper Overview
Research Question
How large is within-industry heterogeneity in energy expenditure
and CO2 productivity?
Motivation
Many environmental policies target industries
• US Clean Air Act
• US Clean Water Act
• California Cap and Trade
• Maybe soon: Border Tax Adjustments
Inefficient if significant within-industry heterogeneity!
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3. Generating Productivity Dispersion Distributions
1. Calculate plant-level productivity: (ln(Y/X))
2. Measure the distribution of productivity across plants within
each industry
3. Calculate measures of dispersion within each industry
Carbon Black Ethyl alcohol Cookware Carpets
90-10 ≈ 2.10 90-10 ≈ 1.85 90-10 ≈ 1.5 90-10 ≈ 2.2
4. Plot the distribution of the dispersion measures
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4. Heterogeneity in Factor Productivity
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5. Total Embodied Emissions
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6. Data Overview
Data from the US Census for
Economic Studies
Census of Manufacturers (CMF)
• Output, labor hours, salaries
and wages, capital stock
• Fuel expenditures, electricity
expenditures and kWh
Manufacturing Energy
Consumption Survey (MECS)
• Fuel quantity and expenditure
breakdowns
CMF Materials Trailer
• Expenditures on materials
Publicly Available Data
Energy Information
Administration (EIA)
• Emissions factors
• State Energy Data Systems
(SEDS) fuel prices
Environmental Protection Agency
(EPA)
• Emissions factors
Bureau of Economic Analysis
(BEA)
• US industry input-output tables
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7. Data Challenges
• The CMF doesn’t have all the energy variables we would want
→ Merge MECS and CMF
• Either lose observations or assign industry means to
establishments
• Years don’t line up
• CMF doesn’t include the smallest establishments
• Materials Trailer has input industry but not establishment
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8. Conclusions
Our Paper
• Energy and CO2 productivity are heterogeneous
• Industry-based carbon standards may be inefficient
• Data limitations may cause us to understate heterogeneity
Open Questions
• How large are welfare consequences of carbon tariffs?
• Why is energy productivity more dispersed than other factors?
• What are implications for heterogeneity in marginal abatement
costs?
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9. Thank you!
elyubich@berkeley.edu
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