Environmental Performance and Profits
19 Pages Posted: 18 Feb 2012
Date Written: February 17, 2012
In this study we investigate how firm level environmental performance (EP) affect firm level economic performance measured as profit efficiency (PE) in a stochastic profit frontier setting. Analyzing firms in Swedish manufacturing 1990-2004, results show that EP induced by environmental policy is not a determinant of PE, while voluntary or non-policy induced EP seem to have a significant (+) effect on firm PE in most sectors. The evidence generally supports the idea that good EP is also good for business, as long as EP is not brought on by policy measures, in this case a CO2 tax.
Keywords: CO2 tax, environmental performance index, profit efficiency, stochastic frontier analysis
JEL Classification: D20, H23
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