The impact of energy prices on industrial investment location: evidence from global firm level data

Saussay, Aurelien ORCID: 0000-0003-4786-0019 and Sato, Misato ORCID: 0000-0002-9978-9595 (2024) The impact of energy prices on industrial investment location: evidence from global firm level data. Journal of Environmental Economics and Management. ISSN 0095-0696 (In Press)

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Abstract

This study examines the influence of relative energy prices on the geographical distribution of industrial investments across 41 countries. Employing a gravity model framework to analyse firms’ investment location decisions, we estimate the model using global bilateral investment flows derived from firm-level M&A data. Our findings reveal that a 10% increase in the energy price differential between two countries results in a 3.2% rise in cross-border acquisitions. This effect is most pronounced in energy-intensive industries and transactions targeting emerging economies. Furthermore, policy simulations suggest that the impact of unilateral carbon pricing on cross-border investments is modest.

Item Type:	Article
Additional Information:	© 2024 The Author
Divisions:	Grantham Research Institute
Subjects:	G Geography. Anthropology. Recreation > GE Environmental Sciences H Social Sciences > HB Economic Theory
JEL classification:	F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment; Long-Term Capital Movements H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q52 - Pollution Control Costs; Distributional Effects; Employment Effects
Date Deposited:	13 May 2024 11:48
Last Modified:	01 Jul 2024 14:30
URI:	http://eprints.lse.ac.uk/id/eprint/123034

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