Using firm-level supply chain networks to measure the speed of the energy transition
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arXiv
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| Format: | Preprint |
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2025
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| author | Stangl, Johannes Borsos, András Thurner, Stefan |
| author_facet | Stangl, Johannes Borsos, András Thurner, Stefan |
| contents | While many national and international climate policies clearly outline decarbonization targets and the timelines for achieving them, there is a notable lack of effort to objectively monitor progress. A significant share of the transition from fossil fuels to low-carbon energy will be borne by industry and the economy, requiring both the decarbonization of the electricity sector and the electrification of industrial processes. But how quickly are firms adopting low-carbon electricity? Using a unique dataset on Hungary's national supply chain network, we analyze the energy portfolios of 25,000 firms, covering more than 75% of gas, 70% of electricity, and 50% of oil consumption between 2020 and 2024. This enables us to objectively measure the trends of decarbonization efforts at the firm level. Although almost half of firms have increased their share of low-carbon electricity, more than half have reduced it. Extrapolating the observed trends, we find a transition of only 20% of total energy consumption to low-carbon electricity by 2050. The current speed of transition in the economy is not sufficient to reach climate neutrality by 2050. However, if firms would adopt the same efforts as the decarbonization frontrunners in their industry, a low-carbon share of up to 70% could be reached, putting climate targets within reach. We examine several firm characteristics that differentiate transitioning from non-transitioning firms. Our results are consistent with a 'lock-in' effect, whereby firms with a high share of fossil fuel costs relative to revenue are less likely to transition. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2503_01572 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Using firm-level supply chain networks to measure the speed of the energy transition Stangl, Johannes Borsos, András Thurner, Stefan General Economics Economics While many national and international climate policies clearly outline decarbonization targets and the timelines for achieving them, there is a notable lack of effort to objectively monitor progress. A significant share of the transition from fossil fuels to low-carbon energy will be borne by industry and the economy, requiring both the decarbonization of the electricity sector and the electrification of industrial processes. But how quickly are firms adopting low-carbon electricity? Using a unique dataset on Hungary's national supply chain network, we analyze the energy portfolios of 25,000 firms, covering more than 75% of gas, 70% of electricity, and 50% of oil consumption between 2020 and 2024. This enables us to objectively measure the trends of decarbonization efforts at the firm level. Although almost half of firms have increased their share of low-carbon electricity, more than half have reduced it. Extrapolating the observed trends, we find a transition of only 20% of total energy consumption to low-carbon electricity by 2050. The current speed of transition in the economy is not sufficient to reach climate neutrality by 2050. However, if firms would adopt the same efforts as the decarbonization frontrunners in their industry, a low-carbon share of up to 70% could be reached, putting climate targets within reach. We examine several firm characteristics that differentiate transitioning from non-transitioning firms. Our results are consistent with a 'lock-in' effect, whereby firms with a high share of fossil fuel costs relative to revenue are less likely to transition. |
| title | Using firm-level supply chain networks to measure the speed of the energy transition |
| topic | General Economics Economics |
| url | https://arxiv.org/abs/2503.01572 |