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Ownership and environmental regulation: Evidence from the European electricity industry

Stefano Clo (), Matteo Ferraris () and Massimo Florio ()

Energy Economics, 2017, vol. 61, issue C, 298-312

Abstract: The paper investigates how ownership affects the environmental performance in developed countries where environmental regulation is introduced in the form of market-based instrument. By looking at a cross-country panel dataset of 29 power markets around Europe over the period 1990–2012, we find empirical evidence that an increase of public ownership, as measured by the OECD ETCR index, is associated with a reduction of both greenhouse gas emissions and carbon intensity. We also find that the implementation of the European Emissions Trading Scheme (ETS) had a limited impact on emissions' reduction due to lax allocation of allowances. The positive effect of public ownership on environmental performance has been significant even after the introduction of the ETS, giving additional incentives to mitigate emissions when the ETS cap was not stringent enough. This evidence suggests that government control over power companies in Europe can has created idiosyncratic incentives to improve environmental quality, complementing environmental regulation in the achievement of environmental goals when the latter was absent or sub-optimal.

Keywords: Public ownership; EU ETS; Electricity industry; Environmental performance; Mixed oligopoly; Market reforms (search for similar items in EconPapers)
JEL-codes: L33 Q4 Q58 C23 (search for similar items in EconPapers)
Date: 2017
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