Causal Impact Of European Union Emission Trading Scheme On Firm Behaviour And Economic Performance: A Study Of German Manufacturing Firms

TL;DR

This study assesses the causal effects of the EU Emission Trading Scheme on German manufacturing firms' emissions and economic performance, using advanced econometric methods to provide robust insights into policy impacts.

Contribution

It introduces a combined difference-in-differences and semi-parametric matching approach to evaluate the EU ETS's impact on firm emissions and competitiveness, applying a stochastic production frontier model.

Findings

EU ETS significantly reduces GHG emissions.

EU ETS has mixed effects on firm competitiveness.

The policy's impact varies across firm sizes and sectors.

Abstract

In this paper, we estimate the causal impact (i.e. Average Treatment Effect, ATT) of the EU ETS on GHG emissions and firm competitiveness (primarily measured by employment, turnover, and exports levels) by combining a difference-in-differences approach with semi-parametric matching techniques and estimators an to investigate the effect of the EU ETS on the economic performance of these German manufacturing firms using a Stochastic Production Frontier model.