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The effect of foreign carbon prices on German outward FDI

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  • Böschemeier, Jonas
  • Jochem, Axel

Abstract

Carbon prices are an integral tool to tackle climate change, yet they could lead to competitive disadvantages for firms that have to pay them. This paper finds that German foreign direct investment decreases in response to higher carbon prices in the destination country, particularly in industries that are both emission-intensive and exposed to international trade.

Suggested Citation

  • Böschemeier, Jonas & Jochem, Axel, 2024. "The effect of foreign carbon prices on German outward FDI," Economics Letters, Elsevier, vol. 234(C).
    • Handle: RePEc:eee:ecolet:v:234:y:2024:i:c:s0165176523005256
    DOI: 10.1016/j.econlet.2023.111499
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    References listed on IDEAS

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    1. Simone Borghesi & Chiara Franco & Giovanni Marin, 2020. "Outward Foreign Direct Investment Patterns of Italian Firms in the European Union's Emission Trading Scheme," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(1), pages 219-256, January.
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    6. Frank Venmans & Jane Ellis & Daniel Nachtigall, 2020. "Carbon pricing and competitiveness: are they at odds?," Climate Policy, Taylor & Francis Journals, vol. 20(9), pages 1070-1091, October.
    7. Aurélien Saussay & Misato Sato, 2018. "The Impacts of Energy Prices on Industrial Foreign Investment Location: Evidence from Global Firm Level Data," Working Papers hal-03475473, HAL.
    8. Marcel P. Timmer & Erik Dietzenbacher & Bart Los & Robert Stehrer & Gaaitzen J. Vries, 2015. "An Illustrated User Guide to the World Input–Output Database: the Case of Global Automotive Production," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 575-605, August.
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    10. Teodora Diana Corsatea & Soeren Lindner & Inaki Arto & Maria Victoria Roman & Jose Manuel Rueda-Cantuche & Agustin Velezquez Afonso & Antonio F. Amores & Frederik Neuwahl, 2019. "World Input-Output Database Environmental Accounts," JRC Research Reports JRC116234, Joint Research Centre.
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    More about this item

    Keywords

    FDI; Carbon prices; Competitiveness; Carbon leakage;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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