Scandinavian Working Papers in Economics

CERE Working Papers,
CERE - the Center for Environmental and Resource Economics

No 2012:7: Determinants of Environmental Expenditure and Investment: Evidence from Sweden

Jurate Jaraite (), Andrius Kažukauskas () and Tommy Lundgren ()
Additional contact information
Jurate Jaraite: CERE, Centre for Environmental and Resource Economics, Postal: Dept of Economics, University of Umeå, S-901 87 Umeå, Sweden
Andrius Kažukauskas: CERE, Centre for Environmental and Resource Economics, Postal: Dept of Economics, University of Umeå, S-901 87 Umeå, Sweden
Tommy Lundgren: CERE, Centre for Environmental and Resource Economics, Postal: Dept of Forest Economics, Swedish University of Agricultural Sciences, S-901 83 Umeå, Sweden

Abstract: This paper provides new evidence on the determinants of environmental expenditure and investment. Also, by employing the Heckman selection models, we study how environmental expenditure and investment by Swedish industrial firms responded to the national and international policies directed to mitigate air pollution during the period 1999 through 2008. We find that firms that use carbon intensive fuels such as oil and gas are more likely to spend to and invest in the environment. Larger, more profitable and more energy intensive firms are more likely to incur environmental expenditure/investment. Overall, an important finding of our econometric analysis is that environmental regulation both on the national and international levels are highly relevant motivations for environmental expenditure and investment.

Keywords: environmental expenditure and investment; environmental policy; EU ETS; panel data

JEL-codes: C23; Q52; Q58

17 pages, February 17, 2012

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