1. Our evidence suggests that firms reorganize their production processes by adjusting inputs and outputs to maintain profitability and increase productivity. However, this conceals significant heterogeneity, whereby less-regulated and smaller firms, on average, make abatement investments and display higher productivity. By contrast, more-regulated and larger firms primarily respond by adjusting their energy inputs and product portfolios away from coal. Without comprehensive data on production responses, understanding margins of adjustment for emissions reduction and accurately tracing who bears the disproportionate costs of regulation;Duan Dai;Kala and Gechter,2001