The Heterogeneous Effects of Carbon Pricing: Macro and Micro Evidence

Brendan Berthold (), Ambrogio Cesa-Bianchi, Federico Di Pace and Alex Haberis
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Brendan Berthold: University of Lausanne

No 2319, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: This paper investigates the economic effects of carbon pricing policies using a panel of countries that are members of the EU Emissions Trading System. Carbon pricing shocks lead, on average across countries, to a decline in economic activity, higher inflation, and tighter financial conditions. These average responses mask a large degree of heterogeneity: the effects are larger for higher carbon-emitting countries. To sharpen identification, we exploit granular firm-level data and document that firms with higher carbon emissions are the most responsive to carbon pricing shocks. We develop a theoretical model with green and brown firms that accounts for these empirical patterns and sheds light on the transmission mechanisms at play.

Keywords: Business Cycles; Carbon Pricing Shocks; Heterogeneity; Asset Prices (search for similar items in EconPapers)
JEL-codes: E32 E50 E60 H23 Q54 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2023-07
New Economics Papers: this item is included in nep-ene, nep-env and nep-ifn
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: The heterogeneous effects of carbon pricing: macro and micro evidence (2024)
Working Paper: The Heterogeneous Effects of Carbon Pricing: Macro and Micro Evidence (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:cfm:wpaper:2319

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