CERE Working Papers, CERE - the Center for Environmental and Resource Economics
No 2010:11:
Climate Policy and Profit Efficiency
Tommy Lundgren ()
and Per-Olov Marklund ()
Abstract: As widely recognized, human mankind stands before the most
challenging problem of preventing anthropogenic climate change. As a
response to this, the European Union advocates an ambitious climate policy
mix. However, there is no consensus concerning the impact of stringent
environmental policy on firms’ competitiveness and profitability. From the
traditional ‘static’ point of view there are productivity losses to be
expected. On the other hand, the so called Porter hypothesis suggests the
opposite; i.e., due to ‘dynamic’ effects, ambitious climate and energy
policies within the EU could actually be beneficial to firms in terms of
enhanced profitability and competitiveness. Based on Sweden’s manufacturing
industry, our main purpose is to specifically assess the impact of the CO2
tax scheme of Sweden on firms’ profit efficiency. The empirical methodology
is based on stochastic frontier estimations and, in general, the results
suggest we can neither reject nor confirm the Porter hypothesis across
industry sectors. Therefore, we do not generally confirm the argument of
stringent environmental policies having positive dynamic effects that
potentially offset costs related to environmental policy.
Keywords: CO2 tax; efficiency; stochastic frontier analysis; Swedish industry; (follow links to similar papers)
JEL-Codes: D20; H23; Q52; Q55; (follow links to similar papers)
40 pages, June 2, 2010
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