The Heterogeneous Effects of Carbon Pricing: Macro and Micro Evidence

Brendan Berthold, Ambrogio Cesa-Bianchi, Federico Di Pace and Alex Haberis

No 18312, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper investigates the economic effects of carbon pricing policies using a panel of countries that are members of the EU Emissions Trading System. Carbon pricing shocks lead, on average across countries, to a decline in economic activity, higher inflation, and tighter financial conditions. These average responses mask a large degree of heterogeneity: the effects are larger for higher carbon-emitting countries. To sharpen identification, we exploit granular firm-level data and document that firms with higher carbon emissions are the most responsive to carbon pricing shocks. We develop a theoretical model with green and brown firms that accounts for these empirical patterns and sheds light on the transmission mechanisms at play.

Keywords: Heterogeneity; Cointegrated asset prices (search for similar items in EconPapers)
JEL-codes: E32 E50 E60 H23 Q54 (search for similar items in EconPapers)
Date: 2023-07
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Related works:
Working Paper: The heterogeneous effects of carbon pricing: macro and micro evidence (2024)
Working Paper: The Heterogeneous Effects of Carbon Pricing: Macro and Micro Evidence (2023)
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