Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2022-09-07
Number: 22-061/V
Author-Name: Leon Bremer
Author-Workplace-Name: Vrije Universiteit Amsterdam
Author-Name: Konstantin Sommer
Author-Workplace-Name: University of Amsterdam
Title: Competitiveness and investments under emissions trading
Abstract: We study the effects of the EU Emissions Trading System (ETS) on
employment and profits as well as on the investment decisions of Dutch
manufacturing firms. Motivated both by sizable differences between firms
that are regulated in different phases and by the gradual increase in regulatory stringency, we pay close attention to treatment effect heterogeneity
between firms and over time. We use microdata from Statistics Netherlands
to apply two difference-in-differences (DiD) estimators: (1) a matched twoway fixed effects regression and (2) a recently developed, more flexible DiD
method, designed for staggered treatment and treatment effect heterogeneity. We find that firms that were first regulated in phase 1 and 2 experience
temporary employment losses of between 7 to 9% early in the regulation,
but we do not find conclusive evidence for changes in profits. Firms that
were regulated the earliest reduced their investments throughout all phases.

Classification-JEL: H23, L51, Q52

Keywords: Emissions trading, Environmental regulation, Staggered Difference-in-Differences, Treatment heterogeneity, Manufacturing
File-URL: https://papers.tinbergen.nl/22061.pdf
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Handle: RePEc:tin:wpaper:20220061