Scandinavian Working Papers in Economics

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

No 2013:4: Carbon Prices and Incentives for Technological Development

Tommy Lundgren (), Per-Olov Marklund (), Eva Samakovlis () and Wenchao Zhou ()
Additional contact information
Tommy Lundgren: CERE, Centre for Environmental and Resource Economics, Postal: Umeå University and SLU, , Umeå, , Sweden
Per-Olov Marklund: CERUM, Centre for Regional Science, Postal: Umeå University, , Umeå, , Sweden
Eva Samakovlis: National Institute of Economic Research, Postal: Stockholm, , Sweden
Wenchao Zhou: CERUM, Centre for Regional Science, Postal: Umeå University, , Umeå, , Sweden

Abstract: How to significantly decrease carbon dioxide emissions has become one of the largest challenges faced by modern society. The standard recipe prescribed by most economists is to put a price on carbon, either through a tax or through emissions trading. Such measures can reduce emissions cost-effectively and create incentives for technological development. There is, however, a growing concern that the carbon prices generated through the European Union emission trading system (EU ETS) have been too low to create the incentives necessary to stimulate technological development. This paper empirically analyzes how the Swedish carbon dioxide tax and the EU ETS have affected productivity development in the Swedish pulp and paper industry 1998-2008. A Luenberger total factor productivity (TFP) indicator is computed using data envelopment analysis. How the policy measures affect TFP is assessed using a system generalized method of moments estimator. The results show that climate policy had a modest impact on technological development in the pulp and paper industry, and if significant it has been negative. The price on fossil fuels, on the contrary, seems to have created important incentives for technological development. Hence, results suggest that the carbon prices faced by the industry through EU ETS and the carbon dioxide tax have been too low.

Keywords: CO2 tax; EU ETS; Luenberger productivity indicator; GMM

JEL-codes: D22; D24; Q54; Q55; Q58

30 pages, May 2, 2013

Full text files

CERE_WP2013-4.pdf PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Mona Bonta Bergman ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:37:54.