Filippo Belloc
DEPS, USiena
Bouwe Dijkstra
University of Nottingham, School of Economics
Edilio Valentini
University of Chieti-Pescara, Department of Economic Studies
Abstract
We develop a new measure of installation-level environmental compliance costs under an Emissions Trading System (ETS) by estimating normalized demand curves of permits sector-by-sector. Our measure reflects installation-level compliance costs deviations within-sector and it is scaled by both the installation’s baseline output and the sector-specific abatement efficiency. An application to four sectors in Phase 3 of the EU ETS unveils a non-negligible within-sector variance and reveals that the installation-level dimension explains the largest part of it, while the country effect accounts for 7.7% to 11.4% of the total within-sector variance. This points to the installation-level dimension as mostly important when the impact of environmental regulations has to be assessed in practice.
Keywords
compliance costs, environmental regulation, abatement technology, EU ETS
Jel Codes
L50, L60, Q52, Q58
