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Testing for causality between climate policies and carbon emissions reduction

Author

Listed:
  • Bertrand Candelon

    (UCL - Université Catholique de Louvain = Catholic University of Louvain, Maastricht University [Maastricht])

  • Jean-Baptiste Hasse

    (UCL - Université Catholique de Louvain = Catholic University of Louvain, AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this paper, we evaluate the causal effects of climate policies on carbon emissions reduction. Specifically, we investigate the properties of the Granger causality test in the frequency domain, assuming that the dependent variables include a binary variable and a continuous variable (resp. treatment and outcome variables). Monte Carlo simulations confirm that: (i) this test is valid under this assumption; and (ii) it has more power than its time-domain counterpart. Then, using Sweden as a case study, we evaluate the impact of the Kyoto Protocol, the Swedish carbon tax, and the European Union Emissions Trading System (EU ETS) on carbon emissions reduction over the period 1964-2021. Our empirical results indicate that only the carbon tax Granger causes carbon emissions reduction in the long run. Our methodological framework offers policymakers a useful toolbox for climate policy evaluation as well as new insights into the outcomes of international treaties and carbon pricing policies.

Suggested Citation

  • Bertrand Candelon & Jean-Baptiste Hasse, 2023. "Testing for causality between climate policies and carbon emissions reduction," Post-Print hal-04104020, HAL.
    • Handle: RePEc:hal:journl:hal-04104020
    DOI: 10.1016/j.frl.2023.103878
    Note: View the original document on HAL open archive server: https://amu.hal.science/hal-04104020
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    More about this item

    Keywords

    Granger causality; Spectral analysis; Climate policy; Carbon pricing;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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