IMF Working Papers

Employment Effects of Environmental Policies – Evidence From Firm-Level Data

By Adil Mohommad

May 14, 2021

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Adil Mohommad. Employment Effects of Environmental Policies – Evidence From Firm-Level Data, (USA: International Monetary Fund, 2021) accessed October 11, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The employment impact of environmental policies is an important question for policy makers. We examine the effect of increasing the stringency of environmental policy across a broad set of policies on firms’ labor demand, in a novel identification approach using Worldscope data from 31 countries on firm-level CO2 emissions. Drawing on evidence from as many as 5300 firms over 15 years and the OECD environmental policy stringency (EPS) index, it finds that high emission-intensity firms reduce labor demand upon impact as EPS is tightened, whereas low emission-intensity firms increase labor demand, indicating a reallocation of employment. Moreover, tightening EPS during economic contractions appears to have a positive effect on employment, other things equal. Quantifications exercises show modest positive net changes in employment for market-based policies, and modest negative net changes for non-market policies (mainly emission quantity regulations) and for the combined aggregate EPS. Within market-based policies, the percent decline in employment in high-emission firms (correspondingly the increase in low-emission firms) for a unit change in a policy index is smallest (largest) for trading schemes (“green” certificates, and “white” certificates)—although stringency is not comparable across indices. Finally, the employment effects of EPS are not persistent.

Subject: Economic sectors, Employment, Environment, Environmental policy, Financial crises, Greenhouse gas emissions, Labor, Labor demand, Non-renewable resources

Keywords: Emission-intensity firm, Employment, Employment effect, Environmental policy, Global, Greenhouse gas emissions, IMF working paper research Department, Intensity firm, Labor demand, Non-renewable resources, Policy index

Publication Details

  • Pages:

    29

  • Volume:

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  • DOI:

    ---

  • Issue:

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  • Series:

    Working Paper No. 2021/140

  • Stock No:

    WPIEA2021140

  • ISBN:

    9781513573618

  • ISSN:

    1018-5941