Going green by putting a price on pollution: Firm-level evidence from the EU

Arbeitspapier

This paper shows that, when the price of emission allowances is sufficiently high, emission trading schemes improve the emission efficiency of highly polluting firms. The efficiency gain comes from a relative decrease in emissions rather than a relative increase in operating revenue. Part of the improvement is realized via the acquisition of green firms. The size of the improvement depends on the initial allocation of free emission allowances: highly polluting firms receiving more emission allowances for free, such as firms on the carbon leakage list, have a weaker incentive to become more efficient. For identification, we exploit the tightening in EU ETS regulation in 2017, which led to a steep price increase of emission allowances and made the ETS regulation more binding for polluting firms.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: NBB Working Paper ; No. 390

Classification and Topics

• Classification: Wirtschaft ; Firm Behavior: Empirical Analysis ; Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance ; Corporate Finance and Governance: Government Policy and Regulation ; Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling ; Climate; Natural Disasters and Their Management; Global Warming
• Subject: climate change ; climate regulation ; emission trading ; firm behaviour ; M&A

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): De Jonghe, Olivier ; Mulier, Klaas ; Schepens, Glenn
• Event: Veröffentlichung
• (who): National Bank of Belgium
• (where): Brussels
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/238177
• Last update: 10.03.2025, 11:42 AM CET