The effects of the 2021-2022 energy crisis on medium-sized and large industrial firms

Abstract:

We study the causal impact of energy price shocks on Italian industrial firms during the 2021-22 energy crisis. For identification we exploit the staggered expiration of fixed-price energy contracts, which generates sudden and large increases in the price of energy at the firm level (by 45% for electricity and 34% for natural gas, on average). After contract expiration, firms do not cut electricity consumption and cut that of natural gas (by 22% on average) only in the second half of 2022. Firms were able to substitute the energy content of gas with other fossil fuels only to a limited extent. The energy price shock induces affected firms to reduce their production levels more than unaffected ones, while there is no differential effect on the price of their final goods.