Climate regulation, firm emissions, and green takeovers

Olivier De Jonghe, Klaas Mulier, Glenn Schepens and Leonard Stimpfle

No 3253, Working Paper Series from European Central Bank

Abstract: We show that an unexpected tightening of the EU Emissions Trading System led high-emission-intensity firms to cut emissions relative to low-intensity peers within the same industry, without reducing output, thereby improving emission efficiency. Effects are stronger for power producers than for manufacturing firms. Examining mergers and acquisitions (M&As), we find that high-intensity manufacturing firms acquire more green targets after the tightening than low-intensity firms, with no change in the overall number of acquisitions, indicating a shift in focus rather than activity. Finally, we show that these green M&As contributed to the observed emission reductions over the study period. JEL Classification: D22, G34, G38, Q53, Q54

Keywords: climate regulation; emission trading; firm behavior; M&A (search for similar items in EconPapers)
Date: 2026-07
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20263253

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