Strategic Ability and Corporate Carbon Emissions

Sebastian Schwenen
Technical University of Munich
April 04, 2022 – 05:00 – 06:15 PM (CEST)
Live virtual event: please register for this talk via Zoom

Speaker Bio
Sebastian Schwenen is Assistant Professor at the School of Management at Technical University of Munich, where he is also heading the Center for Energy Markets. His fields of research are applied microeconomics and industrial organization, with a focus on energy markets and the decarbonization of industries. Much of his recent work explores regulation and market design in low-carbon energy markets. His research has been published, amongst others, in the RAND Journal of Economics, International Journal of Industrial Organization, Journal of Economics and Management Strategy, Review of Accounting Studies, The Energy Journal, Energy Economics, and Energy Policy.

Sebastian Schwenen obtained his PhD at the Copenhagen Business School, was visiting PhD at the London School of Economics and Political Science, Research Fellow at the European University Institute, Florence School of Regulation, and Research Fellow at the German Institute for Economic Research DIW Berlin. He is also Research Affiliate at the Mannheim Center for Sustainable Energy Studies.

Seminar Abstract
We measure the ability of  firms to play oligopoly games, and the consequences for market efficiency and carbon emissions if  firms lack strategic ability and deviate from Nash-equilibrium outcomes. Making use of rich micro-level data from the Spanish electricity market, we show that large incumbent firms approximately offer optimal output and charge optimal prices. Smaller firms lack strategic ability and tend to „price their production out of the market“. We show that this heterogeneity in strategic ability deteriorates the efficiency of carbon pricing, because the allocation of carbon abatement across  firms is not optimal. We  find that large and strategically able firms with high shares of low-carbon generation are pivotal for efficient abatement and for decreasing the sector's carbon intensity. We compute co­unterfactual merger cases that allow for higher carbon prices and decrease the sector's carbon intensity, at no costs for consumers.

Admission information
The seminar is open to the public. 
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