Energy and Misallocation: Evidence from Brazil

The research finds a positive correlation between energy and resource misallocation in Brazilian industry, suggesting that improving the allocation of resources to the most productive firms would simultaneously increase aggregate productivity and energy efficiency. Using data from 2007 to 2015, the authors demonstrate that resource misallocation increased over this period, acting as the primary barrier to productivity growth. While the potential aggregate output gains from fully equalizing revenue productivity are substantial, ranging from 77.9% to 96.2%, the analysis reveals that capital distortions are significantly more impactful than electricity distortions in generating these losses. The study concludes that broad industrial policies targeting these binding distortions are more effective for improving aggregate energy efficiency than firm-level initiatives.

• Resource and energy misallocation in Brazil increased between 2007 and 2015, serving as the primary obstacle to the growth of aggregate productivity and energy efficiency.
• There is a positive cross-sectional relationship between energy allocation efficiency and overall resource allocation efficiency across 106 industries, indicating no trade-off between economic productivity and environmental gains.
• Full equalization of revenue productivity (TFPR) within industries could lead to aggregate manufacturing output gains between 77.9% and 96.2% for the period 2007-2015.
• Capital distortions are significantly more influential than electricity distortions in causing resource misallocation and productivity losses; eliminating capital distortions alone would increase productivity by 30.3%, while electricity distortions would only yield a 2.4% increase.
• The manufacturing of refined petroleum products exhibited the highest potential for output increase through resource reallocation at 290.4%, while the manufacture of musical instruments was the most efficient with a potential gain of 15.8%.
• Firm characteristics such as larger employment, higher human capital (skill level), and a higher share of family employees are positively associated with energy efficiency.
• The study suggests that industrial-level initiatives are more effective for improving energy efficiency in Brazil than firm-level programs, as the latter do not address the broader distortions that bind resource allocation.

APA

Schutze, A., Oliveira, S., & Assunção, J. (2019). Energy and Misallocation: Evidence from Brazil. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2018/11/Energy-and-misallocation-evidence-from-brazil.pdf

Chicago

Schutze, Amanda, Sara Oliveira, and Juliano Assunção. Energy and Misallocation: Evidence from Brazil. Climate Policy Initiative, 2019. https://www.climatepolicyinitiative.org/wp-content/uploads/2018/11/Energy-and-misallocation-evidence-from-brazil.pdf.

Wikipedia

{{cite report |last1=Schutze |first1=Amanda |last2=Oliveira |first2=Sara |last3=Assunção |first3=Juliano |title=Energy and Misallocation: Evidence from Brazil |publisher=Climate Policy Initiative |date=June 2019 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2018/11/Energy-and-misallocation-evidence-from-brazil.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{schutze2019energy, author = {Schutze, Amanda and Oliveira, Sara and Assunção, Juliano}, title = {{Energy and Misallocation: Evidence from Brazil}}, institution = {Climate Policy Initiative}, year = {2019}, month = jun, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2018/11/Energy-and-misallocation-evidence-from-brazil.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }