The Impacts of the EU ETS on Efficiency – An Empirical Analyses for German Manufacturing Firms
35 Pages Posted: 6 Jan 2017
Date Written: December 15, 2016
We investigate the effect of the European Union Emissions Trading System (EU ETS) on the economic performance of manufacturing firms in Germany. Our difference-in-differences framework relies on several parametric conditioning strategies and nearest neighbor matching. As a measure of economic performance, we use the firm specific distance to the stochastic production frontier recovered from official German production census data. None of our identification strategies provide evidence for a statistically significant negative effect of emissions trading on economic performance. On the contrary, the results of the nearest neighbor matching suggest that the EU ETS rather had a positive impact on the economic performance of the regulated firms, especially during the first compliance period. A subsample analysis confirms that EU ETS increased the efficiency of treated firms in at least some two-digit industries.
Keywords: Control of Externalities, Emissions Trading, Economic Performance, Manufacturing, Difference-in-Differences, Nearest Neighbor Matching, Stochastic Production Frontier
JEL Classification: Q52, D22, Q38, Q48
Suggested Citation: Suggested Citation