THE IMPACT OF GREEN POLICIES ON LOCAL ECONOMIC PERFORMANCE: EVIDENCE FROM THE EU ETS

Speaker: Ireri Hernandez Carballo, Bocconi University and RFF-CMCC European Institute on Economics and the Environment (EIEE), CMCC

Moderator: Cristina Cattaneo, RFF-CMCC European Institute on Economics and the Environment (EIEE), CMCC

Abstract: Environmental policies such as the European Union Emissions Trading System (EU ETS) raise concerns about their impact on employment and competitiveness. Yet, exist- ing EU ETS studies focus on firm-level outcomes and the initial phases of the program. We construct a panel dataset of about 15,000 European NUTS3 level provinces between 2005 and 2019 to assess the impact of the EU ETS, and in particular on its Phase III, on the local economic performance, namely gross value added (GVA), employment, and productivity per employee (PPE) of European provinces. We employ data on emissions covered by the EU ETS to construct a continuous measure of local level exposure. Using a continuous difference-in-differences fixed effects framework, we find that that being more exposed to the EU ETS is associated with negative and significant results on employment and significant increases in productivity, starting from Phase II. These results are confirmed both at the sector and general NUTS3 level, suggesting that local economies have generally been able to increase their productivity as an answer to the constraints posed by the EU ETS system.

Paper’s Authors: Gian Maria Mallarino, Bocconi University and OECD, and Ireri Hernandez Carballo, Bocconi University and RFF-CMCC European Institute on Economics and the Environment (EIEE), CMCC