National Productivity Week 27th January 2025 | Visit Website

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The Institute’s key research themes
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We’re a UK-wide research
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productivity means for business

Businesses are crucial to solving
the UK’s productivity problems.

Do climate policies explain the productivity puzzle?

Productivity growth in advanced economies has slowed. What accounts for it remains a puzzle. One possible explanation lies with the increased stringency of environmental regulations. We investigate this possibility in the case of the regulated energy network industries in a sample of OECD countries over the period 1998-2016. Our analysis is twofold. First, using the growth accounting method, we estimate total factor productivity (TFP) growth in the electricity and gas sectors and find that these exhibit a lower TFP growth than the whole economy over the period. TFP growth falls further post-financial crisis. Second, we identify the impact of climate policies on productivity levels. We find that energy and climate policy indirectly reduced energy sector and economy-wide productivity.

Author Victor Ajayi, Geoffroy Dolphin, Karim Anaya, Michael Pollitt


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V. Ajayi, G. Dolphin, K. Anaya, M Pollitt (2022) V. Ajayi, G. Dolphin, K. Anaya, M Pollitt (2022) Do climate policies explain the productivity puzzle? Evidence from the Energy Sector. Working Paper No. 016, The Productivity Institute.