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The impacts of the climate change levy on business: evidence from microdata

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  • Martin, Ralf
  • Wagner, Ulrich J.
  • de Preux, Laure B.

Abstract

We estimate the impacts of the Climate Change Levy (CCL) on manufacturing plants using panel data from the UK production census. Our identification strategy builds on the comparison of outcomes between plants subject to the CCL and plants that were granted an 80% discount on the levy after joining a Climate Change Agreement (CCA). Exploiting exogenous variation in eligibility for CCA participation, we find that the CCL had a strong negative impact on energy intensity and electricity use. We cannot reject the hypothesis that the tax had no detrimental effects on economic performance and on plant exit.

Suggested Citation

  • Martin, Ralf & Wagner, Ulrich J. & de Preux, Laure B., 2009. "The impacts of the climate change levy on business: evidence from microdata," LSE Research Online Documents on Economics 51588, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:51588
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    Cited by:

    1. Yu Zhang & Jie Wang & Jiakai Chen & Weizhong Liu, 2023. "Does environmental regulation policy help improve business performance of manufacturing enterprises? evidence from China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(5), pages 4335-4364, May.
    2. Raphael Calel, 2020. "Adopt or Innovate: Understanding Technological Responses to Cap-and-Trade," American Economic Journal: Economic Policy, American Economic Association, vol. 12(3), pages 170-201, August.
    3. Michael Grubb & Alexandra Poncia & Paul Drummond & Karsten Neuhoff & Jean-Charles Hourcade, 2023. "Policy complementarity and the paradox of carbon pricing," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 39(4), pages 711-730.
    4. Marianne Fay & Stephane Hallegatte & Adrien Vogt-Schilb & Julie Rozenberg & Ulf Narloch & Tom Kerr, 2015. "Decarbonizing Development," World Bank Publications - Books, The World Bank Group, number 21842.
    5. 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.
    6. Napp, T.A. & Gambhir, A. & Hills, T.P. & Florin, N. & Fennell, P.S, 2014. "A review of the technologies, economics and policy instruments for decarbonising energy-intensive manufacturing industries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 30(C), pages 616-640.
    7. Dijkstra, Bouwe R. & Rübbelke, Dirk T.G., 2013. "Group rewards and individual sanctions in environmental policy," Resource and Energy Economics, Elsevier, vol. 35(1), pages 38-59.
    8. Hallegatte, Stephane & Fay, Marianne & Vogt-Schilb, Adrien, 2013. "Green industrial policies : when and how," Policy Research Working Paper Series 6677, The World Bank.
    9. Massimiliano Mazzanti & Antonio Musolesi, 2010. "Carbon Abatement Leaders and Laggards Non Parametric Analyses of Policy Oriented Kuznets Curves," Working Papers 2010.149, Fondazione Eni Enrico Mattei.

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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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