Firm-Level Effects of Energy Price Increases

Energy is an essential production input for firms. Governments around the world have been subsidizing the production and consumption of energy for decades. By reforming energy subsidies, governments can reduce some of the distortions affecting how firms mix production inputs to generate output. Although there is extensive academic literature and policy debate about the impacts of energy subsidies and their reform focusing on households, much more limited research and evidence had been available on firm-level effects. From 2010 onward, there has been a growing amount of research examining the various ways in which firms are affected by energy price changes. These recent papers explore how and the extent to which energy price changes affect firms of different sizes, capacities, and setups across various sectors. This paper reviews recent research on the firm-level impacts of energy price increases, documents emerging themes and insights, and offers recommendations for dimensions that can be considered in future work.