The heterogeneous effects of carbon pricing: macro and micro evidence

Brendan Berthold (), Ambrogio Cesa-Bianchi (), Federico Di Pace and Alex Haberis ()
Additional contact information
Brendan Berthold: University of Lausanne
Ambrogio Cesa-Bianchi: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH
Alex Haberis: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 1076, Bank of England working papers from Bank of England

Abstract: This paper investigates the economic effects of carbon pricing policies using a panel of countries that are members of the EU Emissions Trading System. Carbon pricing shocks lead, on average across countries, to a decline in economic activity, higher inflation, and tighter financial conditions. These average responses mask a large degree of heterogeneity: the effects are larger for higher carbon-emitting countries. To sharpen identification, we exploit granular firm-level data and document that firms with higher carbon emissions are the most responsive to carbon pricing shocks. We develop a theoretical model with green and brown firms that accounts for these empirical patterns and sheds light on the transmission mechanisms at play.

Keywords: Business cycles; carbon pricing shocks; heterogeneity; asset prices (search for similar items in EconPapers)
JEL-codes: E32 E50 E60 H23 Q54 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2024-08-05
New Economics Papers: this item is included in nep-eec, nep-ene, nep-ifn and nep-res
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Related works:
Working Paper: The Heterogeneous Effects of Carbon Pricing: Macro and Micro Evidence (2023)
Working Paper: The Heterogeneous Effects of Carbon Pricing: Macro and Micro Evidence (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:1076

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