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The EU ETS and Firm Profits: An Ex-post Analysis for Swedish Energy Firms

  • Yu, Haisan

    ()

    (Department of Economics)

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    In January, 2005, the EU launched the first international emissions trading system (EU ETS), aimed at reducing carbon emissions in a cost-effective way by means of a market-based instrument. In this paper, we use the treatment/control, before/after design of the natural experiment approach to investigate the treatment effect of the EU ETS on the profitability of a sample of Swedish energy firms in 2005 and 2006. We also investigate whether under-cap and over-cap firms respond differently to the EU ETS. The estimation results in general suggest no significant impact in 2005 and a negative significant impact in 2006. The sub-sample analysis suggests that profitability of under-cap and over-cap firms were affected differently by the EU ETS in 2005, but not in 2006.

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    File URL: http://uu.diva-portal.org/smash/get/diva2:394868/FULLTEXT01.pdf
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    Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2011:2.

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    Length: 19 pages
    Date of creation: 19 Nov 2010
    Date of revision:
    Handle: RePEc:hhs:uunewp:2011_002
    Contact details of provider: Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
    Phone: + 46 18 471 25 00
    Fax: + 46 18 471 14 78
    Web page: http://www.nek.uu.se/
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    1. Johansson, Bengt, 2006. "Climate policy instruments and industry--effects and potential responses in the Swedish context," Energy Policy, Elsevier, vol. 34(15), pages 2344-2360, October.
    2. Yihsu Chen & Jos Sijm & Benjamin Hobbs & Wietze Lise, 2008. "Implications of CO 2 emissions trading for short-run electricity market outcomes in northwest Europe," Journal of Regulatory Economics, Springer, vol. 34(3), pages 251-281, December.
    3. Jos Sijm & Karsten Neuhoff & Yihsu Chen, 2006. "CO 2 cost pass-through and windfall profits in the power sector," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 49-72, January.
    4. Meyer, Bruce D, 1995. "Natural and Quasi-experiments in Economics," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 151-61, April.
    5. Widerberg, Anna & Wråke, Markus, 2009. "The Impact of the EU Emissions Trading System on CO2 Intensity in Electricity Generation," Working Papers in Economics 361, University of Gothenburg, Department of Economics.
    6. Brannlund, Runar & Lundgren, Tommy, 2007. "Swedish industry and Kyoto--An assessment of the effects of the European CO2 emission trading system," Energy Policy, Elsevier, vol. 35(9), pages 4749-4762, September.
    7. Anger, Niels & Oberndorfer, Ulrich, 2008. "Firm performance and employment in the EU emissions trading scheme: An empirical assessment for Germany," Energy Policy, Elsevier, vol. 36(1), pages 12-22, January.
    8. Kruger, Joseph & Oates, Wallace E. & Pizer, William A., 2007. "Decentralization in the EU Emissions Trading Scheme and Lessons for Global Policy," Discussion Papers dp-07-02, Resources For the Future.
    9. Fell, Harrison, 2008. "EU-ETS and Nordic Electricity: A CVAR Approach," Discussion Papers dp-08-31, Resources For the Future.
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