Thore Petersen successfully defends his thesis

On Tuesday June 9, IIES graduate student Thore Petersen successfully defended his doctoral thesis, “Frictions and Flexibility in Production: Essays in Energy Economics.”

In his thesis, Thore shows that manufacturing firms are more flexible in their energy use than previously believed. Using detailed data from German industry, he finds that similar factories rely on very different energy mixes, and that electricity use adjusts much more rapidly than fossil fuel use when production changes. Accounting for adjustment frictions, his work reveals that firms are significantly more capable of switching toward cleaner energy sources than standard estimates suggest.

These findings have important policy implications. Thore demonstrates that the long-run ability of firms to substitute away from fossil fuels is roughly three times higher than earlier research indicates. As a result, achieving emissions reductions may be far less costly than previously thought—potentially cutting estimated economic costs by about half—implying that policies such as carbon pricing could be both more effective and less disruptive.

He further shows that conventional estimates understate firms’ responsiveness because they rely on short-run data, which fails to capture gradual adjustments over time. His framework helps distinguish between short- and long-term responses more accurately, with applications beyond energy use.

Finally, his work highlights limits to policy intervention. Studying industrial policies aimed at managing supply chain risks, he finds that when governments cannot commit to stable rules, firms may anticipate intervention and behave inefficiently, in some cases reducing overall welfare.

Conny Olovsson, Sveriges Riksbank, kindly acted as opponent.

Read more about Thore's thesis