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The impacts of the EU ETS on efficiency: An empirical analyses for German manufacturing firms

Andreas Löschel (), Benjamin Lutz and Shunsuke Managi

No 91, MEP Discussion Papers from University of Münster, Münster Center for Economic Policy (MEP)

Abstract: We investigate the effect of the European Union Emissions Trading System (EU ETS) on the economic performance of manufacturing firms in Germany. Our difference-in-differences framework relies on several parametric conditioning strategies and nearest neighbor matching. As a measure of economic performance, we use the firm specific distance to the stochastic production frontier recovered from official German production census data. None of our identification strategies provide evidence for a statistically significant negative effect of emissions trading on economic performance. On the contrary, the results of the nearest neighbor matching suggest that the EU ETS rather had a positive impact on the economic performance of the regulated firms, especially during the first compliance period. A subsample analysis confirms that EU ETS increased the efficiency of treated firms in at least some two-digit industries.

Keywords: Control of Externalities; Emissions Trading; Economic Performance; Manufacturing; Difference-in-Differences; Nearest Neighbor Matching; Stochastic Production Frontier (search for similar items in EconPapers)
JEL-codes: D22 Q38 Q48 Q52 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-bec, nep-cse, nep-eff, nep-ene, nep-env, nep-reg and nep-sbm
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