Carbon Pricing and Firm-Level CO2 Abatement: Evidence from a Quarter of a Century-Long Panel

Peer Reviewed
9 January 2023

Gustav Martinsson, Per Stromberg, Laszlo Sajtos, Christian J. Thomann

Abstract

Sweden was one of the first countries to introduce a carbon tax in 1991. We assemble a unique dataset tracking all CO2 emissions from the Swedish manufacturing sector to estimate the impact of carbon pricing on firm-level emission intensities. In panel regressions, spanning 26 years and around 4,000 firms, we find a statistically robust and economically meaningful negative relationship between emissions and marginal carbon pricing. We estimate an emission-to-pricing elasticity of around two, albeit with substantial heterogeneity across manufacturing subsectors. A simple calibration implies that 2015 CO2 emissions from Swedish manufacturing would have been roughly 30% higher without carbon pricing.

 

Keywords: Carbon taxation, Emissions trading, Climate Policy, Climate change, Green growth, Tax policy

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Publication reference
Martinsson, G., Stromberg, P., Sajtos, L., & Thomann, C. J. (2022). Carbon Pricing and Firm-Level CO2 Abatement: Evidence from a Quarter of a Century-Long Panel. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4206508

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Publication | 9 January 2023