Scandinavian Working Papers in Economics

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

No 2014:2: Did the EU ETS make a difference? An empirical assessment using Lithuanian firm-level data

Jurate Jarait () and Corrado Di Maria
Additional contact information
Jurate Jarait: CERE, UmeƄ University
Corrado Di Maria: University of East Anglia

Abstract: We use a panel dataset of about 5,000 Lithuanian firms between 2003 and 2010, to assess the impact of the EU ETS on the environmental and economic performance of participating firms. Using a matching methodology, we are able to estimate the causal impact of EU ETS participation on CO2 emissions, CO2 intensity, investment behaviour and profitability of participating firms. Our results show that ETS participation did not lead to a reduction in CO2 emissions, while we identify a slight improvement in CO2 intensity. ETS participants are shown to have retired part of their less efficient capital stock, and to have made modest additional investments from 2010. We also show that the EU ETS did not represent a drag on the profitability of participating firms.

Keywords: Cap and trade; CO2 emissions; EU emissions trading system; ex-post evaluation; firm competitiveness; investment; matching; panel data; profits

JEL-codes: C23; L50; Q58

41 pages, January 21, 2014

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