Using a novel cross-country dataset, which merges firm-level financials with information on firms’ participation in the European Unions’ Emissions Trading System (ETS), we investigate how firm performance is affected by tightening of environmental policies that put a price on pollution. We...

This paper investigates the impact of the EU Emissions Trading System (ETS) on the manufacturing sector, a significant contributor to greenhouse gas emissions within the EU. The ETS, a market-based policy tool, imposes a cap on emissions while enabling firms to trade emission allowances....