How effective is emissions pricing? The role of firm-product-level adjustment

Karin Mayr-Dorn

No 2024-10, Economics working papers from Department of Economics, Johannes Kepler University Linz, Austria

Abstract: Climate change is one of the pressing issues of our time, and carbon emissions caused by industrial production are among its most important drivers. This paper analyses how multi-product firms adjust to an increase in the cost of emissions (e.g. due to the introduction of emissions pricing) in terms of their output, product mix, and technology, and how their emissions change in response, depending on firm-specific production patterns and cost structures. My model delivers a (qualitative and quantitative) assessment of changes in aggregate emissions via conventional margins of firm adjustment that have not been sufficiently studied in the literature so far. In numerical simulations, I find that negative effects of emissions pricing on emissions of multi-product firms can be sizeable.

Keywords: emissions; carbon tax; multi-product firms; product mix; technology (search for similar items in EconPapers)
JEL-codes: D24 Q54 Q56 (search for similar items in EconPapers)
Date: 2024-10
New Economics Papers: this item is included in nep-ene and nep-env
Note: English
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Persistent link: https://EconPapers.repec.org/RePEc:jku:econwp:2024-10

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