Heterogeneous Impacts in Voluntary Agreements: A Changes-in-Changes Approach to the UK Climate Change Agreements

Kentaro Florian Mayr () and Paolo Agnolucci
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Kentaro Florian Mayr: University College London Energy
Paolo Agnolucci: University College London Institute for Sustainable Resources

Environmental & Resource Economics, 2023, vol. 86, issue 3, No 2, 345-379

Abstract: Abstract The limited microeconometric evidence on the efficacy of environmental Negotiated Agreements (NAs) is an obstacle to both their introduction and effective design. We help fill this gap by providing evidence on the impact of the second Climate Change Agreements (CCAs) on business electricity consumption and employment. The CCAs are NAs offering a reduction on the Climate Change Levy (CCL), an energy consumption tax, in exchange for commitments to improve energy efficiency. We use the novel changes-in-changes method to account for heterogeneity in treatment effects. Our results indicate that the second CCAs yielded improved outcomes compared to the counterfactual of full CCL with an average reduction of − 4.81% in electricity consumption. They also reveal the importance of allowing for heterogeneity, as the impact on electricity consumption at the identified deciles varied between − 9.33 and 12.54%. This is a marked difference from the first CCAs which were found to increase consumption. The heterogeneity in treatment response is corroborated when extending the study to two large industrial sectors in the sample and when studying firms selecting differing target reporting methods. Confirming the findings from earlier studies of the first scheme, our results indicate a non-statistically significant reduction in employment, about − 4.6% on average, for the second CCAs.

Keywords: Voluntary agreements; Environmental tax; Environmental subsidies; Energy; Changes-in-changes; Climate Change Agreements (search for similar items in EconPapers)
JEL-codes: D22 H23 Q40 Q48 Q58 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10640-023-00797-z

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