Jurate Jaraite

Firm Trading Behaviour and Transaction Costs in the European Union’s Emission Trading System: An Empirical Assessment

To the best of our knowledge, this study is one of the first to empirically analyse the trading behaviour of all ETS firms during the first phase of the EU’s Emissions Trading System. We use a unique dataset which allows investigating the importance of permit trading transaction costs, such as information costs and search costs. This paper shows that transaction costs can play an important role in the initial years of the programme. These costs are significant in explaining why a number of ETS firms did not sell their unused allowances on the market. This study also supports the concerns that transaction costs might be excessive for smaller participants.

Assessing the Transaction Costs of Firms in the EU ETS: Lessons form Ireland

This paper measures the transaction costs incurred by Irish firms under the European Union’s CO2 Emissions Trading Scheme (EU ETS) during its pilot phase (2005 - 2007). Our analysis provides evidence that such costs were mainly administrative in nature. We emphasize the existence of sizeable economies of scale, as the costs per tonne of CO2 were lower for participants with larger allocations. Trading costs were not significant and, hence, not trade inhibitive. Other factors, self-sufficiency in compliance and low allowance prices, played a major role in the decision whether to trade or not during this phase.

The effects of climate policy on environmental expenditure and investment: evidence from Sweden

This study provides new evidence on the determinants of environmental expenditure and investment. In particular, it investigates how environmental expenditure and investment of Swedish industrial firms responded to climate policies, such as the European Unions Emission Trading System (EU ETS) and the Swedish CO2 tax, directed to mitigate air pollution. Overall, an important conclusion of this analysis is that climate policies, both on the national and international levels, were highly relevant motivations for firm environmental expenditure. However, the findings do not support the expectations that the EU ETS and the Swedish CO2 tax encouraged investment in air pollution abatement.

Carbon Pricing: Transaction Costs of Emissions Trading vs. Carbon Taxes

In this paper we empirically compare the transaction costs from monitoring, reporting and verification (MRV) of two environmental regulations directed to cost-efficiently reduce greenhouse gas emissions: a carbon dioxide (CO2) tax and a tradable emissions system. We do this in the case of Sweden, where a set of firms are covered by both types of regulations, i.e., the Swedish CO2 tax and the European Union’s Emissions Trading System (EU ETS). This provides us with an excellent case study as it allows us to disentangle the costs of each regulation from other firm-specific variables that might affect the overall cost of MRV procedures. Our results indicate that the MRV costs of CO2 taxation do not depend on firms’ emissions, while they do in the case of the EU ETS. For firms of equivalent emissions’ size, the MRV costs are lower for CO2 taxation than for the EU ETS, which confirms the general view that regulating emissions upstream by means of a CO2 tax yields lower transaction costs vis-a-vis downstream regulation by means of emission trading.

The effect of mandatory agro-environmental policy on farm environmental performance

The EU farmers are subject to mandatory cross compliance measures requiring them to meet environmental conditions to be eligible for public support. These obligations reinforce incentives for the farmers to change their behaviour towards the environment. We apply quasi-experimental methods to measure the causal relationship between cross-compliance and farm environmental performance. We find that cross compliance reduced farm fertiliser and pesticide expenditure. This result also holds for farmers who participated in other voluntary agro-environmental schemes. However, the results do not support our expectations that farmers who relied on larger shares of public payments had a stronger motivation to improve their environmental performance.

The profitability of power generating firms and policies promoting renewable energy

With policies to promote power generation from renewable energy sources (RES) becoming important part of climate and energy policy worldwide, there is now considerable interest in understanding how these different market-based mechanisms affect power generating firms in practice. The existing theory provides conflicting guidance regarding profitability of Tradable Green Certificates (TGC) over Feed-in-Tariff (FIT) based policies. Thus, the main goal of this study is to empirically assess the performance of power generating firms operating in the TGC scheme environment relative to the performance of power generating firms operating under alternatives RES support mechanisms. The main finding of this study is that, in Europe, TGC schemes are associated with higher returns for power generating firms. This supports the hypothesis that higher investment uncertainty induced by the TGC policy nature coupled with some market imperfections lead to higher profits for electricity producers operating in TGC schemes.

Renewable Energy Policy, Economic Growth and Employment in EU Countries: Gain Without Pain?

Given the intensifying debates whether governments should use industrial policies to promote particular renewable energy technologies, the main objective of this study is to investigate the long-run effects of renewable energy support policies on economic growth and employment in 15 European Union (EU) member states for the 1990-2012 time period by using panel-data time-series econometric techniques. The first hypothesis is that the EU’s renewable energy support policies lead to technological advancement, followed by economy growth, in the long-run. The second hypothesis states that these policies at least generate an increase in output and employment in the short-run. In summary, our results provide some evidence in support of the second hypothesis, but, in contrary to the similar studies, our findings do not support the first hypothesis that these policies promote growth in the long-run.

Determinants of Environmental Expenditure and Investment: Evidence from Sweden

This paper provides new evidence on the determinants of environmental expenditure and investment. Also, by employing the Heckman selection models, we study how environmental expenditure and investment by Swedish industrial firms responded to the national and international policies directed to mitigate air pollution during the period 1999 through 2008. We find that firms that use carbon intensive fuels such as oil and gas are more likely to spend to and invest in the environment. Larger, more profitable and more energy intensive firms are more likely to incur environmental expenditure/investment. Overall, an important finding of our econometric analysis is that environmental regulation both on the national and international levels are highly relevant motivations for environmental expenditure and investment.