Swedish Industry and Kyoto – An Assessment of the Effects of the European CO2 Emission Permit Trading System

Runar Brännlund () and Tommy Lundgren ()
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Runar Brännlund: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

No 668, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: We assess the effects on Swedish industry input and output demands of different climate policy scenarios

connected to energy policy induced by the Kyoto protocol. A unique data set containing firm level data

on outputs and inputs during the years 1991 – 2001 is used to estimate a factor demand model, which is

then simulated for different policy scenarios. Sector specific estimation suggests that the proposed

quadratic profit function specification exhibit properties and robustness that are consistent with economic

theory; that is, all own-price elasticities are negative and all output elasticities are positive. Furthermore,

the elasticities show that the input demands are, in most cases, relatively inelastic. Simulation of the

model for 6 different policy scenarios reveal that the effects on Swedish base industry of a EU level

permit trade system is dependent on (i) removal or no removal of current CO2 tax, (ii) the established

price of permits, and (iii) what will happen to the electricity price. Our analysis show that changes in

electricity price may be more important than the price of permits for some sectors.

Keywords: CO2- emissions; factor demand; fossil fuels; tradable permit market (search for similar items in EconPapers)
JEL-codes: D21 L70 Q52 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2005-12-05
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Swedish Industry and Kyoto An Assessment of the Effects of the European CO2 Emission Permit Trading System (2006)
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