Environmental Policy and Directed Technological Change: Evidence from the European Carbon Market

Abstract

Abstract-This paper investigates the impact of the European Union Emissions Trading System (EU ETS) on technological change, exploiting installations level inclusion criteria to estimate the System's causal impact on firms' patenting. We find that the EU ETS has increased low-carbon innovation among regulated firms by as much as 10%, while not crowding out patenting for other technologies. We also find evidence that the EU ETS has not affected patenting beyond the set of regulated companies. These results imply that the EU ETS accounts for nearly a 1% increase in European low-carbon patenting compared to a counterfactual scenario.

The influence of carbon cost pass through on the link between carbon emission and corporate financial performance in the context of the European Union Emission Trading Scheme

“…Unfortunately, the CITL reports ownership of facilities inconsistently, making a manual matching of installations to firms necessary. The data-matching procedure was accomplished in two steps following a matching procedure similar to Calel and Dechezlepretre (2016).…”

“…Although narrower as a concept, carbon emission nevertheless is an important issue that lends itself to a fine-grained analysis. Furthermore, verified carbon emissions are published each year on the same date for all installations covered by the EU ETS and can be aggregately measured at firm level (Calel & Dechezlepretre, 2016). Second, by focusing on all listed firms with facilities covered by the mandatory EU ETS, we avoid any sample-selection bias, compared with voluntary carbon disclosure initiatives.…”

The effects and side‐effects of the EU emissions trading scheme

“…Increased patenting activity in low-carbon innovation was found during the period 2005-2009 for firms regulated under the EU ETS (relative to nonregulated, similar firms). 38 Further research along the lines of these studies, using the new emerging data is crucial to understand the full effects of the EU ETS, and thus to understand how best the system can be buttressed and improved.…”

The Best (and Worst) of GHG Emission Trading Systems: Comparing the EU ETS with Its Followers

“…In recent years, particular attention has been devoted to the European Union Emissions Trading System (EU ETS) to reduce climate change. A large body of the literature has investigated the properties of this system from a legal, economic, and institutional viewpoint (see Grubb and Neuhoff, 2006;Tietenberg, 2006;Ellerman et al, 2007;Kruger et al, 2007;Freestone and Streck, 2009;Grubb, 2009;Tuerk et al, 2009;Convery et al, 2010;Ellerman, 2010;OECD, 2011;Olmstead and Stavins, 2012;Burtraw et al, 2013;Delbeke and Vis, 2015), while other studies have investigated its environmental effectiveness (cf., for example, Rogge et al, 2011a,b;Germà and Stephan, 2015;Calel and Dechezleprêtre, 2016). Following the introduction of the EU ETS, several other ETSs have been implemented around the world to reduce greenhouse gas (GHG) emissions.…”

“…Some scholars have based their empirical analyses on surveys of managerial interviews (e.g., Hoffmann, 2007;Aghion et al, 2009;Martin et al, 2011;Rogge et al, 2011a,b;Schmidt et al, 2012), while others have tested the weak version of the Porter hypothesis introducing the EU ETS among the covariates of their econometric models (see Abrell et al, 2011;Borghesi et al, 2015;Calel and Dechezleprêtre, 2016). 19 Although this literature is still in its early stages of development and mainly focused on the early phases of the EU ETS due to a time lag in the data availability, the main conclusion that seems to emerge so far is that the EU ETS had at most a very weak impact on EI.…”