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Economic performance and investments under emissions trading: Untangling the effects of a staggered regulation

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  • Bremer, Leon
  • Sommer, Konstantin

Abstract

We study the effects of the EU Emissions Trading System on the economic performance and investments of Dutch manufacturing firms. Motivated both by sizable differences between firms that became regulated in different phases and by a gradual increase in regulatory stringency, we pay close attention to the staggered design of the ETS as well as to potential treatment effect heterogeneity. We base our estimation on recent advances in the estimation of treatment effects and make use of administrative microdata. Our results align with those of the previous literature. Even when studying the more stringent third phase and when using estimators appropriate for the staggered ETS setting, there seems to be no discernible effects of the ETS on firms’ economic performance. We also do not find any statistically significant effect on the investment behavior of regulated firms.

Suggested Citation

  • Bremer, Leon & Sommer, Konstantin, 2025. "Economic performance and investments under emissions trading: Untangling the effects of a staggered regulation," Energy Economics, Elsevier, vol. 142(C).
    • Handle: RePEc:eee:eneeco:v:142:y:2025:i:c:s014098832400879x
    DOI: 10.1016/j.eneco.2024.108170
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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • 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
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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