Scandinavian Working Papers in Economics

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

No 2012:8: Environmental Performance and Profits

Tommy Lundgren () and Per-Olov Marklund ()
Additional contact information
Tommy Lundgren: CERE, Centre for Environmental and Resource Economics, Postal: Dept of Forest Economics, Swedish University of Agricultural Sciences, S-901 83 Umeå, Sweden
Per-Olov Marklund: CERE, Centre for Environmental and Resource Economics, Postal: Centre for Regional Science, CERUM, University of Umeå, S-901 87 Umeå, Sweden

Abstract: In this study we investigate how firm level environmental performance (EP) affect firm level economic performance measured as profit efficiency (PE) in a stochastic profit frontier setting. Analyzing firms in Swedish manufacturing 1990-2004, results show that EP induced by environmental policy is not a determinant of PE, while voluntary or non-policy induced EP seem to have a significant (+) effect on firm PE in most sectors. The evidence generally supports the idea that good EP is also good for business, as long as EP is not brought on by policy measures, in this case a CO2 tax.

Keywords: CO2 tax; environmental performance index; profit efficiency; stochastic frontier analysis

JEL-codes: D20; H23

19 pages, February 17, 2012

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