During Times of Crisis, Companies Invest in Energy Efficiency, Not in Clean Technology

An empirical analysis of the Slovene manufacturing companies conducted by researchers from the Faculty of Economics of the University of Ljubljana showed that companies invest in energy efficiency even during a crisis, while they are more frugal with investments in clean technologies.

Authors: Nevenka Hrovatin, Nives Dolšak, Jelena Zorić

Researchers from the Faculty of Economics of the University of Ljubljana (Nevenka Hrovatin, Nives Dolšak and Jelena Zorić) analyzed the factors that influence the decisions of Slovene manufacturing companies to invest into energy efficiency and clean technologies with the help of a (bi-variable) probit model on a panel of companies' data in the 2005 to 2011 period. The findings were published in the internationally renowned Journal of Cleaner Production.

High energy costs, the market share, export orientation of a company and favourable expectations from the management on future company operations have significant and positive impacts on both types of investments. On the other hand, foreign ownership has a positive impact only on the energy efficiency related investments. Equally important was the determination that with the exception of expansion of existing capabilities, no other types of innovations in the company are crowding out energy efficiency and clean technology investments, since the effects are complementary. The economic crisis had a negative impact only on the clean technology investments, not on the energy efficiency investments. The latter allows operating cost reductions through to savings on energy, and companies are motivated to invest even during a time of crisis. Additionally, industry-specific characteristics have an important impact on both types of investments, which also pertains to the differences in the rigidity of environmental regulations.

Source: Factors impacting investments in energy efficiency and clean technologies: empirical evidence from Slovenian manufacturing firms; Journal of Cleaner Production 127 (2016), p. 475-486.