Emission trading and overlapping environmental support : installation-level evidence from the EU ETS

by Klaas Mulier, Marten Ovaere and Leo Stimpfle

We collect data on 24,000 state aid cases within the European Union to create granular measures of national environmental support and study their interactions with the European Union Emissions Trading System (EU ETS). Exploiting variation in regulated installations' exposure to carbon prices and an unexpected regulatory tightening of the EU ETS, we show that high exposed installations strongly reduced emissions relative to less exposed installations in the same industry with significant heterogeneity across countries and industries. In the power sector, emission reductions are significantly stronger in countries with more generous renewable energy support policies. In contrast, emission reductions in the manufacturing sector are significantly weaker in country-industries with more generous cost compensation for energy-intensive activities.

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Year of publication:	October 2024
Authors:	Mulier, Klaas ; Ovaere, Marten ; Stimpfle, Leo
Institutions:	NBB Conference Deglobalisation, Decarbonisation and Digitalisation: How the Three Ds Affect Firm Pricing, Markups and Productivity <2024, Brüssel>
Publisher:	Brussels : National Bank of Belgium
Subject:	Cap-and-trade \| Climate policy \| Overlapping policies \| EU ETS \| Emissionshandel \| Emissions trading \| EU-Staaten \| EU countries \| Klimaschutz \| Climate protection \| Umweltpolitik \| Environmental policy \| EU-Umweltpolitik \| EU environmental policy \| Ökosteuer \| Environmental tax \| Wirkungsanalyse \| Impact assessment