The Effect of EU ETS on Firm Productivity and Innovation-related Activity

Terhi Maczulskij

No 139, ETLA Working Papers from The Research Institute of the Finnish Economy

Abstract: Abstract This study examines the impact of the EU Emission Trading System on firms’ productivity and innovation behavior in the Finnish energy-intensive sector. Using unique administrative data on emissions and firm characteristics from 2000 onwards, the effect of the ETS is analyzed using staggered difference-in-difference design. The results show that while firms do not increase productivity or innovation inputs, those regulated are significantly more likely to introduce both process and product innovations. Additional findings suggest that the ETS effectively reduced energy intensity. Together the findings suggest that carbon pricing may stimulate technological adaptation and environmental improvements without generating measurable losses in productivity.

Keywords: EU ETS; Innovation; Productivity (search for similar items in EconPapers)
JEL-codes: D24 O31 O33 Q52 Q58 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2026-06-08
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