Conference Agenda

We study the impact of the introduction of the German national CO2 price on car loans for combustion engine vehicles. The CO2 price specifically targets the transportation sector and entails a steadily rising price path from €25 per ton of CO2 in 2021 to €55 in 2025. By combining data on 24 million European car loans with detailed vehicle information, we apply a tight differences-in-differences design that compares the within-variation in similar car models across treated and control countries. We find a sizable treatment effect of 0.5 percentage points higher interest rates for affected cars for both the policy announcement in 2019 and the policy implementation in 2021. Moreover, we find shrinking lending volumes and reduced credit duration as a result of the policy, indicating that banks incorporate medium to long term transition risk by reducing lending terms. Further analysis reveals notable heterogeneity in the results. Most notably, a triple differences design shows that banks differentiate their lending decisions based on fuel efficiency as the increase in interest rates is higher for more fuel-intensive cars. Concerning banks, we find that commercial banks reduce discounts while manufacturer-owned captive increase discounts, potentially in order to protect manufacturer sales from rising transition risks. These results provide first evidence that carbon pricing policies not only have direct effects on emissions through increasing fuel prices but also impact emissions indirectly through consumer credits.

We collect data on 24,000 state aid cases within the European Union to create granular measures of national environmental support and study their interactions with the European Union Emissions Trading System (EU ETS). Exploiting variation in regulated installations’ exposure to carbon prices and an unexpected regulatory tightening of the EU ETS, we show that high exposed installations strongly reduced emissions relative to less exposed installations in the same industry with significant heterogeneity across countries and industries. In the power sector, emission reductions are significantly stronger in countries with more generous renewable energy support policies. In contrast, emission reductions in the manufacturing sector are significantly weaker in country-industries with more generous cost compensation for energy-intensive activities.

This paper investigates the economic impacts of increased stringency in unilateral climate policy on international trade, using the policy change of phase III of the EU Emission Trading System (EU ETS). The transition from grandfathering to auctioning affected firms heterogeneously across sectors. The study analyzes trade data from Italian firms and finds no evidence of pass-through in trade prices, suggesting that firms do not shift regulatory costs to foreign customers or rely on cheaper imported inputs. The policy change led to increased export volumes, particularly to extra-EU ETS countries, with no significant price adjustments. The extensive margin analysis reveals an increase in the probability of importing from intra and extra-EU ETS countries and exporting to extra-EU ETS countries, suggesting evidence of offshoring (or outsourcing) behaviour.

This project examines the effects of carbon taxation on firms’ decisions to adopt clean technology and its role in driving aggregate technological change. Leveraging data from the EU Emissions Trading System (ETS) spanning the period 2005 to 2018, I construct a novel indicator that reveals the importance of capital growth during structural reductions of emissions at the firm level. Notably, more productive, and polluting firms tend to reduce their emissions more in times of high carbon prices. To quantitatively examine the aggregate impact of this taxation and subsequent decarbonization decisions, I propose a model of heterogeneous firms that incorporates these discrete choices, and explore how governments can direct technical change unilaterally. The model is estimated using all firms in the EU ETS. It demonstrates that the policy is an effective tool for reducing climate emissions. However, while firms transition towards greener practices, the largest firms are better positioned to capitalize on this policy, leading to their further expansion and exacerbating inequalities across firms. Finally, the model stresses the importance of the trade channel in the clean technology adoption.