Conference Agenda

This paper analyses the effect of unilateral environmental policies on global emissions under trade in intermediate inputs. I develop a model of heterogeneous firms with two countries (North-South) in which North firms can invest in abatement activities but also offshore the pollution-intensive part of the production in South. The model suggests that a unilateral increase in North emission tax promotes more abatement activities of the least productive firms while the most productive firms stop investing in abatement and offshore polluting production steps. Marginal increases in North emission tax decrease global emissions when the relative emission tax is low but increase global emissions when it is high. Tests using German firm-level data support the central prediction of the model: offshoring activities reduce firms’ domestic emission intensity, particularly when firms offshore in countries with lax environmental regulations.

Amid weak international cooperation climate policy efforts will largely continue to take the form of unilateral policies. However, concerns about competitiveness and carbon leakage may limit the acceptability of broader and more stringent carbon pricing on domestic production. In this context, Border Carbon Adjustments (BCAs) have gained prominence as a complementary tool that not only levels the playing field between domestic and foreign producers, but that also creates incentives for other economies to step up their climate efforts. Using a trade adjustment dynamics model we investigate if the credible implementation of a BCA by a large trading partner creates incentives for a small open economy (SOE) to tighten its own climate policy. Using data for the Colombian economy, we find that the SOE benefits from increasing its domestic carbon pricing only if the tariffs prescribed by the BCA are sufficiently responsive to the prevailing gap in carbon prices between economies.

We investigate productivity and cost pass-through of German manufacturing firms using administrative data from 2001 to 2018. 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 compute total factor productivity, markups and marginal costs, which in turn allows us to measure cost pass-through. We find that firms pass on shocks to materials costs almost completely, whereas pass-through of energy costs is around 30%. However, the level of energy cost pass-through is no different for firms in “trade-exposed” sectors that continue to receive free allowances. Our results add to the recent literature concerning the causal effects of climate policy on firms and are relevant for policymakers when defining the level of free allowance allocation to industry.

This research aims at disentangling the individual-level impacts on the career patterns and earnings of incumbent workers employed in Italian manufacturing firms subjected to the European Union Emission Trading Scheme (EU-ETS), the largest cap-and-trade scheme ever implemented worldwide and the main policy for reducing greenhouse gas emissions of the industrial sector in the EU. Within the framework of the VisitInps Scholars research programme, we use administrative linked employer-employee data to match each single ETS-firm-specific worker to its non-ETS-firm control worker and perform the analysis via difference-in-difference at the individual level. The richness of the INPS archives allows us to get full coverage of the first three phases of the policy, from the very first implementation year, 2005, until the end of the third phase, 2020, using a pre-treatment control time interval of seven years (1998-2004). The results presented in this paper show a positive impact of the policy on weekly wage and paid days, improving career perspectives and lowering the probability of becoming unemployed.