 Firms’ response to climate regulations: Empirical investigations based on the European Emissions Trading SystemFotios Kalantzis, Salma Khalid, Alexandra Solovyeva and Marcin Wolski Energy Policy, 2025, vol. 206, issue C Abstract: Using a novel cross-country dataset, which merges firm-level financials with information on firms' participation in the European Union Emissions Trading System (EU ETS), we investigate how firm performance is affected by tightening of environmental policies that put a price on pollution. We find that more stringent policies do not have a strong negative impact on the profitability of ETS-regulated or non-ETS firms. While firms report an increase in their input costs during periods of high carbon prices, their reported turnover is also higher. Among ETS-regulated firms which must purchase emission certificates under the EU ETS, tightening of climate policies in periods of high carbon prices results in increased investment, particularly in intangible assets. We establish robustness of our results using a quantile regression analysis, ensuring our key findings are not driven by distributional irregularities. Our findings provide support for the benefits of EU ETS on accelerating firms’ climate transition, while keeping firm-level financial costs at bay. Keywords: Climate finance; Climate change; Decarbonization; Firm-level analysis; Emissions trading system (ETS) (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:206:y:2025:i:c:s0301421525001193 DOI: 10.1016/j.enpol.2025.114612 Access Statistics for this article Energy Policy is currently edited by N. France More articles in Energy Policy from Elsevier |
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