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The impacts of the EU ETS on efficiency and economic performance – An empirical analyses for German manufacturing firms

Author

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  • Löschel, Andreas
  • Lutz, Benjamin Johannes
  • Managi, Shunsuke

Abstract

We investigate the effect of the European Union Emissions Trading System (EU ETS) on the economic performance of manufacturing firms in Germany. Our difference-in-differences framework relies on several parametric conditioning strategies and nearest neighbor matching. As a measure of economic performance, we use the firm specific distance to the stochastic production frontier recovered from official German production census data. None of our identification strategies provide evidence for a statistically significant negative effect of emissions trading on economic performance. On the contrary, the results of the nearest neighbor matching suggest that the EU ETS rather had a positive impact on the economic performance of the regulated firms, especially during the first compliance period. A subsample analysis confirms that EU ETS increased the efficiency of treated firms in at least some two-digit industries.

Suggested Citation

  • Löschel, Andreas & Lutz, Benjamin Johannes & Managi, Shunsuke, 2019. "The impacts of the EU ETS on efficiency and economic performance – An empirical analyses for German manufacturing firms," Resource and Energy Economics, Elsevier, vol. 56(C), pages 71-95.
    • Handle: RePEc:eee:resene:v:56:y:2019:i:c:p:71-95
    DOI: 10.1016/j.reseneeco.2018.03.001
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    More about this item

    Keywords

    Control of externalities; Emissions trading; Economic performance; Manufacturing; Difference-in-differences; Nearest neighbor matching; Stochastic production frontier;
    All these keywords.

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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