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Competitiveness and investments under emissions trading

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  • Leon Bremer

    (Vrije Universiteit Amsterdam)

  • Konstantin Sommer

    (University of Amsterdam)

Abstract

We study the effects of the EU Emissions Trading System (ETS) on employment and profits as well as on the investment decisions of Dutch manufacturing firms. Motivated both by sizable differences between firms that are regulated in different phases and by the gradual increase in regulatory stringency, we pay close attention to treatment effect heterogeneity between firms and over time. We use microdata from Statistics Netherlands to apply two difference-in-differences (DiD) estimators: (1) a matched twoway fixed effects regression and (2) a recently developed, more flexible DiD method, designed for staggered treatment and treatment effect heterogeneity. We find that firms that were first regulated in phase 1 and 2 experience temporary employment losses of between 7 to 9% early in the regulation, but we do not find conclusive evidence for changes in profits. Firms that were regulated the earliest reduced their investments throughout all phases.

Suggested Citation

  • Leon Bremer & Konstantin Sommer, 2022. "Competitiveness and investments under emissions trading," Tinbergen Institute Discussion Papers 22-061/V, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20220061
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    References listed on IDEAS

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    More about this item

    Keywords

    Emissions trading; Environmental regulation; Staggered Difference-in-Differences; Treatment heterogeneity; Manufacturing;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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