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Carbon Pricing and Firm-Level CO2 Abatement: Evidence from a Quarter of a Century-Long Panel

Author

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  • Martinsson, Gustav

    (Royal Institute of Technology, Swedish House of Finance (SHoF))

  • Sajtos, László

    (Tillväxtanalys, Swedish House of Finance (SHoF), Misum)

  • Strömberg, Per

    (Stockholm School of Economics, Swedish House of Finance (SHoF), CEPR, ECGI)

  • Thomann, Christian

    (Royal Institute of Technology, Swedish House of Finance (SHoF), Misum)

Abstract

Sweden was one of the first countries to introduce a carbon tax in 1991. We assemble a unique dataset tracking all CO2 emissions from the Swedish manufacturing sector to estimate the impact of carbon pricing on firm-level emission intensities. In panel regressions, spanning 26 years and around 4,000 firms, we find a statistically robust and economically meaningful negative relationship between emissions and marginal carbon pricing. We estimate an emission-to-pricing elasticity of around two, albeit with substantial heterogeneity across manufacturing subsectors. A simple calibration implies that 2015 CO2 emissions from Swedish manufacturing would have been roughly 30% higher without carbon pricing.

Suggested Citation

  • Martinsson, Gustav & Sajtos, László & Strömberg, Per & Thomann, Christian, 2022. "Carbon Pricing and Firm-Level CO2 Abatement: Evidence from a Quarter of a Century-Long Panel," Misum Working Paper Series 2022-10, Stockholm School of Economics, Mistra Center for Sustainable Markets (Misum).
    • Handle: RePEc:hhs:hamisu:2022_010
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    More about this item

    Keywords

    Carbon taxation; Emissions trading; Climate Policy; Climate change; Green growth; Tax policy;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • 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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