The impact of carbon policy news on the national energy industry

Hugo Morão

No 2024/0321, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: This paper explores the impact of unexpected changes in European carbon policy on Portugal’s energy sector, focusing on effects on sales, output prices, and labor market dynamics. Using a structural vector autoregression (SVAR) model, the study finds that news of tighter carbon regulations leads to a significant short-term increase in domestic sales. Output prices rise in both home and foreign markets, with a larger increase observed in the latter. The labor market responds positively, as evidenced by higher wages and hours worked. The study also reveals that these carbon policy changes have played a significant role in historical fluctuations within the energy sector, especially during the Great Financial Crisis and key policy changes. The findings highlight the importance of judicious policymaking concerning carbon regulations, as the escalation in energy prices wields significant economic effects, though not all of these effects are bad from the energy industry standpoint.

Keywords: climate policy; carbon credits; emissions trading; cap and trade; Euro Area; SVAR (search for similar items in EconPapers)
JEL-codes: E32 E62 H23 L94 Q48 Q58 (search for similar items in EconPapers)
Date: 2024-05
New Economics Papers: this item is included in nep-ene, nep-env and nep-eur
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Journal Article: The impact of carbon policy news on the national energy industry (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ise:remwps:wp03212024

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