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Environmental policy and profitability - Evidence from Swedish industry

Author

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  • Brännlund, Runar

    (Department of Economics, Umeå University)

  • Lundgren, Tommy

    (Department of Forest Economics, Swedish University of Agricultural Sciences)

Abstract

The purpose of this paper is to investigate the existence of a “Porter effect” using firm level data on output and inputs from Swedish industry between 1990 and 2004. By utilizing a factor demand modeling approach, and specifying a profit function which has a technology component dependent upon firm specific effective tax on CO2, we are able to separate out the effect of regulatory pressure on technological progress. The results indicate that there is evidence of a reversed “Porter effect” in most industrial sectors, specifically energy intensive industries.

Suggested Citation

  • Brännlund, Runar & Lundgren, Tommy, 2008. "Environmental policy and profitability - Evidence from Swedish industry," Umeå Economic Studies 750, Umeå University, Department of Economics.
    • Handle: RePEc:hhs:umnees:0750
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    Cited by:

    1. Thierry Bréchet & Sylvette Ly, 2013. "The many traps of green technology promotion," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 15(1), pages 73-91, January.
    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. Benhong Peng & Yu Tu & Guo Wei, 2018. "Can Environmental Regulations Promote Corporate Environmental Responsibility? Evidence from the Moderated Mediating Effect Model and an Empirical Study in China," Sustainability, MDPI, vol. 10(3), pages 1-16, February.
    4. Jana Stoever & John P. Weche, 2018. "Environmental Regulation and Sustainable Competitiveness: Evaluating the Role of Firm-Level Green Investments in the Context of the Porter Hypothesis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 70(2), pages 429-455, June.
    5. Doran, Justin & Ryan, Geraldine, 2012. "Regulation and Firm Perception, Eco-Innovation and Firm Performance," MPRA Paper 44578, University Library of Munich, Germany.
    6. 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.
    7. Jessica Coria & Jūratė Jaraitė, 2019. "Transaction Costs of Upstream Versus Downstream Pricing of $$\hbox {CO}_{2}$$ CO 2 Emissions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(4), pages 965-1001, April.
    8. Johan Brolund & Robert Lundmark, 2017. "Effect of Environmental Regulation Stringency on the Pulp and Paper Industry," Sustainability, MDPI, vol. 9(12), pages 1-16, December.
    9. Zhang, Shanshan & Lundgren, Tommy & Zhou, Wenchao, 2016. "Energy efficiency in Swedish industry," Energy Economics, Elsevier, vol. 55(C), pages 42-51.
    10. Brännlund, Runar & Lundgren, Tommy & Marklund, Per-Olov, 2011. "Environmental performance and climate policy," Sustainable Investment and Corporate Governance Working Papers 2011/1, Sustainable Investment Research Platform.
    11. Broberg, Thomas & Marklund, Per-Olov & Samakovlis, Eva & Hammar, Henrik, 2010. "Does environmental leadership pay off for Swed-ish industry? - Analyzing the effects of environ-mental investments on efficiency," Working Papers 119, National Institute of Economic Research.
    12. Miller, Sebastián J. & Vela, Mauricio A., 2013. "Are Environmentally Related Taxes Effective?," IDB Publications (Working Papers) 4685, Inter-American Development Bank.
    13. Thomas Broberg & Per-Olov Marklund & Eva Samakovlis & Henrik Hammar, 2013. "Testing the Porter hypothesis: the effects of environmental investments on efficiency in Swedish industry," Journal of Productivity Analysis, Springer, vol. 40(1), pages 43-56, August.
    14. Brännlund, Runar & Lundgren, Tommy & Marklund, Per-Olov, 2014. "Carbon intensity in production and the effects of climate policy—Evidence from Swedish industry," Energy Policy, Elsevier, vol. 67(C), pages 844-857.
    15. Jurate Jaraite & Andrius Kazukauskas & Tommy Lundgren, 2014. "The effects of climate policy on environmental expenditure and investment: evidence from Sweden," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 3(2), pages 148-166, July.
    16. Tommy Lundgren & Per-Olov Marklund, 2015. "Climate policy, environmental performance, and profits," Journal of Productivity Analysis, Springer, vol. 44(3), pages 225-235, December.
    17. Amjadi, Golnaz, 2020. "Essays on Energy Efficiency, Environmental Regulation and Labor Demand in Swedish Industry," Umeå Economic Studies 982, Umeå University, Department of Economics.
    18. Frank Goetzke & Tilmann Rave & Ursula Triebswetter, 2012. "Diffusion of environmental technologies: a patent citation analysis of glass melting and glass burners," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 14(2), pages 189-217, April.

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    More about this item

    Keywords

    CO2 tax; factor demands; induced technological change; Porter argument;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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