worsening of the energy terms of trade in the euro area. This has impacted companies by reducing their purchasing power and increasing operational costs, affecting their profitability and investment decisions. Ari et al. (2022) employed the IMF-World Bank CPAT model and found clear evidence of a regressive impact on European households’ finances. However, the effects on European businesses are less clear-cut, with mixed results regarding the loss of competitiveness. The increase in energy costs for energy-dependent and trade-sensitive industries within the European Union may not be disproportionately higher than for non-EU countries due to variations in natural gas reliance or the use of other energy products across different nations.

When evaluating the effects of fluctuating energy prices, the role of fossil fuel subsidies must be carefully considered. Accurately pricing fossil fuels is essential for the efficient allocation of an economy's scarce resources and investment across sectors and activities. An efficient price incorporates both the supply costs and the environmental externalities of fuel consumption (Coady et al. 2019). However, substantial subsidies or underpricing distort market signals, leading to the overconsumption of fossil fuels, exacerbating global warming, and intensifying local environmental degradation. For instance, Black et al. (2023) report that global fossil fuel subsidies reached an unprecedented $7 trillion in 2023, as governments sought to shield consumers and businesses from energy price spikes triggered by the Russian Federation’s invasion of Ukraine and the post-pandemic economic recovery. These subsidies, while aimed at providing short-term relief, may have inadvertently delayed firms' and households' consideration of environmental costs in consumption and investment decisions. As a result, the adoption of energy-efficient technologies and sustainable practices has likely been postponed, undermining long-term climate goals (Bovenberg & de Mooij 1994; Parry et al. 2021).

Against this backdrop, this paper contributes to the existing body of research by focusing on the impact of country-specific energy price fluctuations during 2019-2023 on firms in emerging economies using the World Bank Business Pulse Survey—a dataset not used yet for this type of analysis in the literature— together with the CPRS classification of Battiston et al. (2022) to gauge the risk exposure of sectors to (the intensity of treatment by) the energy price fluctuations. Furthermore, the paper contributes to the literature by shedding light on the specific context of emerging economies, employing rapid survey data to grasp the nuances of business cycles, using the quarterly country-specific electricity price tariffs for businesses, matching the latter with the month in which a firm was surveyed, and highlighting the differentiated effects of sectoral energy intensity in conjunction with firm-level energy efficiency measures as indicators of a firm's exposure to energy price fluctuations and preparedness to manage energy price shocks.

Cali et al. (2022, 2023) that electricity price increases, on average, lead to higher productivity and sales for firms. However, the magnitude of this positive effect is significantly reduced for firms that have not implemented energy efficiency measures, suggesting that such initiatives are critical for firms to adapt to evolving energy market trends. In addition, when the baseline results are subjected to a battery of robustness tests the results do not survive in all alternative specifications. By contrast, we find that rising electricity prices exert a negative effect on employment, particularly in energy-intensive industries where energy efficiency measures are absent. This result highlights the vulnerability of labor markets in sectors heavily reliant on energy (electricity) inputs, especially in developing economies where the adoption of efficiency-enhancing technologies often lags.

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