Working Paper BETA #2011-15

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Title : Assessing the impact of the EU ETS using firm level data.

Author(s) : Jan Abrell, Anta Ndoye Faye, Georg Zachmann

Abstract : · This paper investigates the impact of the European Union’s Emission Trading System (EU ETS) at a firm level. Using panel data on the emissions and performance of more than 2000 European firms from 2005 to 2008, we are able to analyse the effectiveness of the scheme. · The results suggest that the shift from the first phase (2005-2007) to the second phase (2008-2012) had an impact on the emission reductions carried out by firms. The initial allocation also had a significant impact on emission reduction. This challenges the relevance for the ETS of Coase’s theorem (Coase, 1969), according to which the initial allocation of permits is irrelevant for the post-trading allocation of marketable pollution permits. · Finally, we found that the EU ETS had a modest impact on the participating companies’ performance. We conclude that a full auctioning system could help to reduce emissions but could also have a negative impact on the profits of participating companies.

Key-words : panel data, energy, climate change, evaluation econometrics, firm behaviour

JEL Classification : D21, C23, Q49