various measures to promote investment, innovation and productivity growth. Welldesigned policy intervention that combines carbon pricing instruments with targeted adjustment support to overcome initial obstacles to adopting new technologies can yield a win-win outcome of higher productivity and lower emissions. However, the current evidence base for policy design is limited. This paper contributes precisely to this gap by assessing the effects of energy price changes on firm outcomes.

To this end, the paper uses the publicly available version of the Chilean _Annual National Industrial Survey_ to study the effects of energy prices on firm outcomes. The data contains 100,803 observations on 12,169 plants, with an average of 4,200 unique firms observed across survey years from 1995 to 2015. We estimate separate elasticities of electricity and fossil fuel for various firm-level outcomes such as productivity, energy efficiency, employment, wages, and profits employing fixed-effects (FE) panel estimations.<sup>5</sup> We also estimate the heterogeneity in responses by firm attributes and non-linearities conditional on energy price levels. We add to the robustness of our results through an Instrumental Variable approach where we utilize the regional energy distribution cost to account for unobserved reverse causality.

This paper makes the following broad contributions: _First_ , it finds that overall increases in energy prices generally do not hurt firm competitiveness. _Second_ , it confirms notable heterogeneity in how energy price surges affect firm performance of the Chilean manufacturing sector in line with other recent works. These depend on the type of energy input, i.e. electricity vs fossil fuels, (Amann et al., 2021; Cal`ı et al., 2022, among others) and hint at various degrees of substitutability between distinct production inputs conditional on firm characteristics (Brucal and Dechezleprˆetre, 2021, among others). For instance, while electricity price increases negatively correlate with production and employment, fossil fuel price increases are not necessarily detrimental to firm performance. For example, a 10% rise in fossil fuel prices correlates significantly with a capital investment increase of 3.1% and an increase in output per worker of 0.8%. In other words, our results support the _strong_ version of the Porter Hypothesis (Porter, 1991; Porter and Van der Linde, 1995) for fossil fuel increases but not for electricity price increases. _Third_ , it points out extensive heterogeneities of energy price hikes along many dimensions. We find heterogeneous effects by firm attributes such as size, ownership and location. The heterogeneity analysis suggests that the strong version of the Porter Hypothesis can only be observed for large firms (with 50 employees or above). By comparison, small firms observe a negative correlation with surges in energy prices in general and electricity prices in particular. Our results also indicate that the Porter-type adoption mechanism is

> 5We construct a harmonized unit price index for fossil fuels by combining information on coal, gas, diesel, petrol, LPG and kerosene use of Chilean manufacturing firms.

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