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Carbon intensity and corporate performance: A micro-level study of EU ETS industrial firms

Author

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  • Alienor Cameron
  • Maria Garrone

Abstract

To reach its 2050 objective of carbon neutrality, the European Union (EU) must continue to step up its climate efforts, while ensuring the competitiveness of its industries is not harmed. The EU Emission Trading Scheme (ETS) is at the core of the bloc's industrial decarbonization efforts. This paper explores this topic by digging into whether there is a causal relationship between industrial firms' emission intensity and their economic and financial performance. We construct a dataset covering around 1,200 industrial firms covered by the EU ETS' third phase and estimate a novel indicator of volume-based emission intensities for these firms. Applying an IV approach to a within-firm panel model, we find that firms' emission intensity is negatively related to their corporate performance, and that this does not depend on the competitive environment they operate in.

Suggested Citation

  • Alienor Cameron & Maria Garrone, 2024. "Carbon intensity and corporate performance: A micro-level study of EU ETS industrial firms," EconomiX Working Papers 2024-26, University of Paris Nanterre, EconomiX.
    • Handle: RePEc:drm:wpaper:2024-26
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    File URL: https://economix.fr/pdf/dt/2024/WP_EcoX_2024-26.pdf
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    References listed on IDEAS

    as
    1. Gita Gopinath & Şebnem Kalemli-Özcan & Loukas Karabarbounis & Carolina Villegas-Sanchez, 2017. "Capital Allocation and Productivity in South Europe," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(4), pages 1915-1967.
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    More about this item

    Keywords

    EU ETS; heavy industry; emission intensity; corporate performance.;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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