Scandinavian Working Papers in Economics

Misum Working Paper Series,
Stockholm School of Economics, Mistra Center for Sustainable Markets (Misum)

No 2022-10: Carbon Pricing and Firm-Level CO2 Abatement: Evidence from a Quarter of a Century-Long Panel

Gustav Martinsson (), László Sajtos (), Per Strömberg () and Christian Thomann ()
Additional contact information
Gustav Martinsson: Royal Institute of Technology, Swedish House of Finance (SHoF)
László Sajtos: Tillväxtanalys, Swedish House of Finance (SHoF), Misum
Per Strömberg: Stockholm School of Economics, Swedish House of Finance (SHoF), CEPR, ECGI
Christian Thomann: Royal Institute of Technology, Swedish House of Finance (SHoF), Misum

Abstract: Sweden was one of the first countries to introduce a carbon tax in 1991. We assemble a unique dataset tracking all CO2 emissions from the Swedish manufacturing sector to estimate the impact of carbon pricing on firm-level emission intensities. In panel regressions, spanning 26 years and around 4,000 firms, we find a statistically robust and economically meaningful negative relationship between emissions and marginal carbon pricing. We estimate an emission-to-pricing elasticity of around two, albeit with substantial heterogeneity across manufacturing subsectors. A simple calibration implies that 2015 CO2 emissions from Swedish manufacturing would have been roughly 30% higher without carbon pricing.

Keywords: Carbon taxation; Emissions trading; Climate Policy; Climate change; Green growth; Tax policy

JEL-codes: H23; H23; Q54; Q58

Language: English

66 pages, October 6, 2022

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