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The impact of carbon policy news on the national energy industry

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  • Morão, Hugo

Abstract

This paper explores the impact of unexpected changes in European carbon policy on Portugal’s energy sector, focusing on effects on sales, output prices, and labor market dynamics. Using a structural vector autoregression (SVAR) model, the study finds that news of tighter carbon regulations leads to a significant short-term increase in domestic sales. Output prices rise in both home and foreign markets, with a larger increase observed in the latter. The labor market responds positively, as evidenced by higher wages and hours worked. The study also reveals that these carbon policy changes have played a significant role in historical fluctuations within the energy sector, especially during the Great Financial Crisis and key policy changes. The findings highlight the importance of judicious policymaking concerning carbon regulations, as the escalation in energy prices wields significant economic effects, though not all of these effects are bad from the energy industry standpoint.

Suggested Citation

  • Morão, Hugo, 2024. "The impact of carbon policy news on the national energy industry," Energy Economics, Elsevier, vol. 134(C).
    • Handle: RePEc:eee:eneeco:v:134:y:2024:i:c:s0140988324003049
    DOI: 10.1016/j.eneco.2024.107596
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    More about this item

    Keywords

    Climate policy; Carbon credits; Emissions trading; Cap and trade; Euro area; Proxy-SVAR; Correlation restrictions;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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