Environmental policy and investment location: The risk of carbon leakage in the EU ETS

Filippo Maria D'Arcangelo and Marzio Galeotti

Energy Policy, 2025, vol. 202, issue C

Abstract: •Environmental Policy and Investment Location: The Risk of Carbon Leakage in the EU ETS.•Novel green-field data offer new insights on the effect of the EU ETS on cross-country investments.•Identification is ensured with a firm-level exposure variable obtained leveraging a model of firms' production.•Investments react to carbon pricing and that the effect is stronger for more emitting firms.•The aggregate investment effect is small, not justifying the past compensations offered as free allowances.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:202:y:2025:i:c:s0301421525000941

DOI: 10.1016/j.enpol.2025.114587

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