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The impact of the EU ETS on productivity and markups
Project funded by own resources
Project title The impact of the EU ETS on productivity and markups
Principal Investigator(s) Hintermann, Beat
Project Members Zarkovic, Maja
Picard, Léo
Organisation / Research unit Departement Wirtschaftswissenschaften / Public Economics / Public Finance (Hintermann)
Project start 01.10.2019
Probable end 31.12.2023
Status Completed

We investigate productivity and cost pass-through of German manufacturing firms using administrative data from 2001 to 2014. Our framework allows for the estimation of quantity-based production functions for multi-product firms while controlling for unobserved productivity shocks and unobserved input quality. Using our parameter estimates, we can compute total factor productivity, markups and marginal costs. We find no effect of the EU ETS on firm productivity or profits for the whole sector, and a positive effect for some industries. Firms pass on shocks to materials costs completely, or even more than completely, whereas pass-through of energy costs is around 35-60\%. Although pass-through of energy costs is incomplete, it nevertheless allowed firms to recover more than their total carbon costs due to generous free allocation of allowances. Our results add to the recent literature concerning the causal effects of climate policy on firms and are relevant for policy makers when defining the level of free allowance allocation to industry.

Keywords Productivity, markup, EU ETS, climate change, cost pass-through, emissions trading
Financed by University funds
Follow-up Project of... 3242117 Measuring the effectiveness and efficiency of the European Union Emissions Trading Scheme

Cooperations ()

  ID Kreditinhaber Kooperationspartner Institution Laufzeit - von Laufzeit - bis
4493248  Hintermann, Beat  Di Maria, Corrado, Associate Professor  University of East Anglia  01.11.2015  31.12.2023 
4525108  Hintermann, Beat  Wagner, Ulrich, Professor  University of Mannheim  01.06.2019  31.12.2022 

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