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Climate Policy & Corporate Behavior

Abstract:
In this paper, we study the impact of energy taxes and the EU ETS on a large number of firms in Europe between 1996 and 2007. Using company level micro-data, we examine how firms in different sectors were affected by environmental policies. Aspects of behavior and performance studied include total factor productivity, employment levels, investment behavior and profitability. On the whole, energy taxes increased total factor productivity and returns to capital but decreased employment, with a mixed effect on investment, for the sectors included in our analysis. However, large sectoral variation is observed, with some industries losing out in terms of productivity and profitability when faced with increased energy taxes, while others benefitted.

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Energy Specializations: Energy Investment and Finance – Public and Private Risks, Risk Management; Energy and the Environment – Climate Change and Greenhouse Gases; Energy and the Environment – Policy and Regulation

JEL Codes: Q58: Environmental Economics: Government Policy, Q41: Energy: Demand and Supply; Prices, D22: Firm Behavior: Empirical Analysis, Q40: Energy: General, Q52: Pollution Control Adoption and Costs; Distributional Effects; Employment Effects, D21: Firm Behavior: Theory, Q28: Renewable Resources and Conservation: Government Policy

Keywords: energy taxes, productivity, investment, firm performance

DOI: 10.5547/ISSN0195-6574-EJ-Vol32-No4-4


Published in Volume 32, Number 4 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.