# **1. Introduction**

The link between rising energy costs and firm performance has garnered increasing attention in academic and policy discussions due to the broader adoption of carbon pricing mechanisms and the gradual elimination of energy subsidies. As these policy changes elevate nonrenewable energy prices—a crucial input in the production processes of many industries—firms may experience notable performance implications. Higher energy costs generally affect profitability and operational efficiency by increasing production expenses, particularly in energy-intensive sectors. Firms with greater energy dependence often face heightened stock market volatility due to increased uncertainty and lower expected cash flows (Sadorsky 1999; Henriques & Sadorsky 2008). Moreover, rising energy costs may constrain corporate investment strategies, leading to reduced capital expenditures, especially in industries reliant on energy inputs (Kilian 2008; Bloom 2009).

link between energy price fluctuations and firm performance. Cali et al. (2022) show that, in Indonesia and Mexico, increases in electricity prices harm manufacturing plants’ performance. However, fuel price hikes result in higher productivity and profits of manufacturing plants. Fuel prices incentivize plants to replace inefficient fuel-powered with more productive electricity-powered capital equipment. Their results help to re-evaluate the policy trade-off between reducing carbon emissions and improving economic performance, particularly in countries with large fuel subsidies, such as Indonesia and Mexico. Cali et al. (2023) studied firms from 12 sectors and 11 middle-income countries during 2002–2013, using World Bank Enterprise Survey data. The study did not consistently find that higher energy prices negatively affect economic performance; they may even enhance it in some cases. Firms might be able to offset increased energy costs through innovation or new market strategies. The impact of energy prices on firms is a multifaceted issue, depending on several characteristics, including energy intensity, firm size, ownership type, and previous experience with electricity outages—which made companies less sensitive to price increases, likely due to their familiarity with managing energy and input shortages.

Andre et al. (2023) analyze firm-level data from 21 OECD countries (1995–2020) and show that energy price shocks impact firm productivity through immediate cost increases and longer-term adjustments. The study highlights sectoral and firm-level heterogeneity, finding that energy price hikes initially reduce productivity, particularly in energy-intensive sectors and firms under financial constraints. However, medium-term productivity improvements often follow as firms adapt, typically through increased investment. These findings align with the "pollution haven" hypothesis, which suggests that higher energy costs erode competitiveness and may drive firms to relocate (Copeland & Taylor 2004), and the Porter hypothesis, which posits that higher carbon prices can enhance productivity by incentivizing efficiency and innovation (Porter & van der Linde 1995). This dual perspective underscores the nuanced impact of energy price shocks on firm outcomes, blending short-term losses with potential long-term gains.

The recent energy price surge, triggered by the strong economic recovery following COVID-19 and the Russian invasion of Ukraine, has sparked renewed interest in the subject. Battistini et al. (2022) focus on EU economies during 2020-2022 and highlight a few interesting aspects. Energy price shocks disproportionately affect firms based on their energy dependence and hedging strategies. Energyintensive sectors are particularly hard-hit, facing greater financial stress and profitability challenges due to heightened costs and supply chain disruptions. Spiking energy prices have triggered a significant 2