The Impacts of the EU ETS on Efficiency – An Empirical Analyses for German Manufacturing Firms

35 Pages Posted: 6 Jan 2017

See all articles by Andreas Löschel

Andreas Löschel

University of Muenster - Chair of Microeconomics, esp. Energy and Resource Economics

Benjamin Johannes Lutz

ZEW – Leibniz Centre for European Economic Research

Shunsuke Managi

Kyushu University

Date Written: December 15, 2016

Abstract

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

Löschel, Andreas and Lutz, Benjamin Johannes and Managi, Shunsuke, The Impacts of the EU ETS on Efficiency – An Empirical Analyses for German Manufacturing Firms (December 15, 2016). ZEW - Centre for European Economic Research Discussion Paper No. 16-089, Available at SSRN: https://ssrn.com/abstract=2894196 or http://dx.doi.org/10.2139/ssrn.2894196

Andreas Löschel

University of Muenster - Chair of Microeconomics, esp. Energy and Resource Economics ( email )

Universitätsstr. 14-16
48143 Munster
Germany

HOME PAGE: http://www.wiwi.uni-muenster.de/eroe

Benjamin Johannes Lutz (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Shunsuke Managi

Kyushu University

6-19-1, Hakozaki, Higashiku
Fukuoka, 812-8581
Japan

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