Firms’ Response to Climate Regulations-Empirical Investigations Based on the European Emissions Trading System
IMF Working Papers, June 28, 2024
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Bibliographic details
- Authors: Fotios Kalantzis, Salma Khalid, Alexandra Solovyeva, Marcin Wolski
- Published: June 28, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400279126.001
Summary
- Authors: Fotios Kalantzis, Salma Khalid, Alexandra Solovyeva, Marcin Wolski
- Date: June 28, 2024
- Core dataset: novel cross-country dataset merging firm-level financials with information on firms’ participation in the European Union’s Emissions Trading System (ETS)
- Research question: How firm performance is affected by tightening of environmental policies that put a price on pollution
Key empirical findings
- More stringent policies do not have a strong negative impact on the profitability of ETS-regulated or non-ETS firms.
- Firms report an increase in their input costs during periods of high carbon prices, and their reported turnover is also higher.
- Among ETS-regulated firms that must purchase emission certificates under the EU ETS, tightening of climate policies in periods of high carbon prices results in increased investment, particularly in intangible assets.
Robustness and methods
- Robustness check: quantile regression analysis
- Purpose: ensure key findings are not driven by distributional irregularities
Policy implications and interpretive conclusions
- Findings provide support for the benefits of EU ETS on accelerating firms’ climate transition, while keeping firm-level financial costs at bay.
Subject and keywords
- Subject: Climate policy, Emissions trading, Environment, Environmental policy, Greenhouse gas emissions
- Keywords: climate change, climate finance, Climate policy, climate transition, decarbonization, Emissions trading, Emissions Trading System (ETS), Environmental policy, ETS firm, ETS-regulated firm, EU Emissions Trading System, firm-level analysis, Global, Greenhouse gas emissions, IMF working paper No. 24/135
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