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Labour Productivity and Development of Carbon Competitiveness: Industry-Level Evidence from Europe

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  • Kaitila, Ville

Abstract

A drastic decline in global greenhouse gas (GHG) emissions is needed to stop the climate change. This requires a variety of political and market mechanisms. Europe is globally at the forefront among the industrialised countries in reducing its GHG emissions. We analyse the development of emission intensities – GHG emissions relative to value added produced – and use a panel data to further our understanding of their evolution at the level of industries in 2008–2020 in Europe. We find that labour productivity is negatively associated with changes in GHG-emission intensities. Furthermore, higher investments, higher carbon prices within the ETS mechanism, and higher environmental taxes are associated with lower GHG-emission intensities. Consequently, policies that promote productivity growth and financial incentives to decrease emissions lead to lower emissions. Finland’s carbon competitiveness, as measured by relative GHG-emission intensities, varies by industries. See also Etla Brief no 123 Carbon Competitiveness is Shaped in Firms (in Finnish).

Suggested Citation

  • Kaitila, Ville, 2023. "Labour Productivity and Development of Carbon Competitiveness: Industry-Level Evidence from Europe," ETLA Reports 139, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:report:139
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Greenhouse gas emissions (GHG); GHG-intensity; Carbon competitiveness; Productivity; ETS;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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