Arbeitspapier

Are emissions trading schemes cost-effective?

The use of price instruments is often advocated by economists, based on their ability to bring about marginal abatement cost equalisation, and hence to achieve targets at least cost. We use the EU ETS as a case study and test this theoretical prediction. We parametrically estimate separate hyperbolic and enhanced hyperbolic distance functions for various industries of the German manufacturing sector and are therefore able to compute the shadow value of CO2 emissions. We are the first to provide firm-level estimates of the marginal cost of CO2 emissions using confidential administrative data for German manufacturing firms between 2005 and 2014. This allows for an unprecedented insight into the cost of the EU flagship climate policy for manufacturing firms. We are able to describe the evolution of the abatement costs over time and across industries, tracking the impact of changes in the policy design and its stringency on the behaviour of the firms in our panel. Our findings provide valuable information for policy makers in the European Union and beyond on the actual level of the costs imposed by climate change policy, and its distributional impacts across firms and industries.

Language
Englisch

Bibliographic citation
Series: WWZ Working Paper ; No. 2020/13

Classification
Wirtschaft
Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
Industry Studies: Manufacturing: General
Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
Subject
Hyperbolic Distance Function
Stochastic Frontier Analysis
Cost-effectiveness
Emissions Trading

Event
Geistige Schöpfung
(who)
Di Maria, Corrado
Žarković, Maja
Hintermann, Beat
Event
Veröffentlichung
(who)
University of Basel, Center of Business and Economics (WWZ)
(where)
Basel
(when)
2020

DOI
doi:10.5451/unibas-ep79572
Handle
Last update
20.09.2024, 8:24 AM CEST

Data provider

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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Arbeitspapier

Associated

  • Di Maria, Corrado
  • Žarković, Maja
  • Hintermann, Beat
  • University of Basel, Center of Business and Economics (WWZ)

Time of origin

  • 2020

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