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Climate Policy and Profit Efficiency

Author

Listed:
  • Lundgren, Tommy

    (Umeå School of Business at Umeå University, Umeå, Sweden)

  • Marklund, Per-Olov

    (Centre for Environmental and Resource Economics (CERE), Umeå University and Swedish University of Agricultural Science, Umeå Sweden)

Abstract

As widely recognized, human mankind stands before the most challenging problem of preventing anthropogenic climate change. As a response to this, the European Union advocates an ambitious climate policy mix. However, there is no consensus concerning the impact of stringent environmental policy on firms’ competitiveness and profitability. From the traditional ‘static’ point of view there are productivity losses to be expected. On the other hand, the so called Porter hypothesis suggests the opposite; i.e., due to ‘dynamic’ effects, ambitious climate and energy policies within the EU could actually be beneficial to firms in terms of enhanced profitability and competitiveness. Based on Sweden’s manufacturing industry, our main purpose is to specifically assess the impact of the CO2 tax scheme of Sweden on firms’ profit efficiency. The empirical methodology is based on stochastic frontier estimations and, in general, the results suggest we can neither reject nor confirm the Porter hypothesis across industry sectors. Therefore, we do not generally confirm the argument of stringent environmental policies having positive dynamic effects that potentially offset costs related to environmental policy.

Suggested Citation

  • Lundgren, Tommy & Marklund, Per-Olov, 2010. "Climate Policy and Profit Efficiency," Sustainable Investment and Corporate Governance Working Papers 2010/12, Sustainable Investment Research Platform.
  • Handle: RePEc:hhb:sicgwp:2010_012
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    References listed on IDEAS

    as
    1. Brännlund, Runar & Lundgren, Tommy, 2009. "Environmental policy without costs? A review of the Porter hypothesis," Umeå Economic Studies 766, Umeå University, Department of Economics.
    2. Brännlund, Runar & Lundgren, Tommy, 2009. "Environmental policy without costs? A review of the Porter hypothesis," Sustainable Investment and Corporate Governance Working Papers 2009/1, Sustainable Investment Research Platform.
    3. Brannlund, Runar & Lundgren, Tommy, 2009. "Environmental Policy Without Costs? A Review of the Porter Hypothesis," International Review of Environmental and Resource Economics, now publishers, vol. 3(2), pages 75-117, September.
    4. van der Vlist, Arno J. & Withagen, Cees & Folmer, Henk, 2007. "Technical efficiency under alternative environmental regulatory regimes: The case of Dutch horticulture," Ecological Economics, Elsevier, vol. 63(1), pages 165-173, June.
    5. Runar Brännlund & Tommy Lundgren, 2010. "Environmental policy and profitability: evidence from Swedish industry," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 12(1), pages 59-78, June.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Costantini, Valeria & Mazzanti, Massimiliano, 2012. "On the green and innovative side of trade competitiveness? The impact of environmental policies and innovation on EU exports," Research Policy, Elsevier, vol. 41(1), pages 132-153.
    2. Lundgren, Tommy & Marklund, Per-Olov & Samakovlis, Eva & Zhou, Wenchao, 2013. "Carbon Prices and Incentives for Technological Development," CERE Working Papers 2013:4, CERE - the Center for Environmental and Resource Economics.
    3. Anabel Zárate-Marco & Jaime Vallés-Giménez, 2015. "Environmental tax and productivity in a decentralized context: new findings on the Porter hypothesis," European Journal of Law and Economics, Springer, vol. 40(2), pages 313-339, October.
    4. Jaraite, Jurate & Kažukauskas, Andrius & Lundgren, Tommy, 2012. "Determinants of Environmental Expenditure and Investment: Evidence from Sweden," CERE Working Papers 2012:7, CERE - the Center for Environmental and Resource Economics.
    5. Coria, Jessica & Jaraite, Jurate, 2015. "Carbon Pricing: Transaction Costs of Emissions Trading vs. Carbon Taxes," Working Papers in Economics 609, University of Gothenburg, Department of Economics.
    6. Tommy Lundgren & Per-Olov Marklund, 2015. "Climate policy, environmental performance, and profits," Journal of Productivity Analysis, Springer, vol. 44(3), pages 225-235, December.
    7. Alatorre, José Eduardo & Peres Núñez, Wilson & Bárcena Ibarra, Alicia & Samaniego, Joseluis, 2020. "The climate emergency in Latin America and the Caribbean: The path ahead – resignation or action?," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 45678 edited by Eclac, May.

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    Keywords

    CO2 tax; efficiency; stochastic frontier analysis; Swedish industry;
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