Chile

This paper analyzes the impact of changes in energy prices on the competitiveness of manufacturing firms in Chile. We find that, (i) increases in energy prices generally do not hurt firm competitiveness; (ii) the impact of energy prices depends on the fuel type—while electricity price increases are negatively correlated with firm outcomes, fossil fuel price increases have a positive association with investment and firm productivity; (iii) these effects are heterogeneous and vary by firm attributes such as size, ownership and location; (iv) the positive correlation between fossil fuel price increases and capital upgrading is particularly pronounced when energy prices are at relatively low levels.

Switching Chilean firms to more sustainable production is critical to realising the country’s ambition of carbon neutrality by 2050.