Multinational corporations and the EU Emissions Trading System: The specter of asset erosion and creeping deindustrialization |
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| Institution: | 1. University of Siena, Italy;3. University of Roma Tre, Italy;4. University of Rome “Tor Vergata”, Italy;5. University of Ferrara, Italy;6. ECO&ECO, Bologna, Italy;1. Universitè de Pau et des Pays de l''Adour, CATT, Avenue Poplawski, 64000 Pau, France;2. Sciences Po Aix, CHERPA, 25 rue Gaston de Saporta, 13100 Aix-en-Provence, France;1. Department of Economics, University of Maryland, 3114 Tydings Hall, College Park, MD 20742, United States;2. Dyson School of Applied Economics and Management, 405 Warren Hall, Cornell University, Ithaca, NY 14853, United States;3. World Bank, 1818H ST NW, Washington, DC 20006, United States;1. INRA-UR1303 ALISS, 65 bd de Brandebourg 94205 Ivry-sur-Seine, France;2. CNRS-Ecole Polytechnique, route de Saclay, 91128 Palaiseau, France;3. CNRS-CIRED, 45 bis av. de la Belle Gabrielle, 94736 Nogent-sur-Marne, France |
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| Abstract: | This study seeks to investigate the causal effect of the EU Emissions Trading System (EU ETS) on firms' holdings of fixed assets as an early indicator of industrial relocation, exploiting installation level inclusion criteria of the regulation. To single out companies with particularly low relocation costs, global multinational enterprises (MNEs), we identify ownership structures for the full sample of EU ETS-firms. Matched Difference-in-Differences estimates provide robust evidence that contradicts the specter of an erosion of European asset bases. Baseline results for the manufacturing sector indicate that the EU ETS led to an on average increase of treated firms' asset bases of 12,1%. However, for a particular subgroup of MNEs, this increase is a mere 2.1%. For these companies, the EU ETS may have induced a shift in investment priorities. |
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| Keywords: | EU ETS Cap-and-trade Carbon leakage Multinational corporation F23 H23 Q54 Q58 C21 |
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