The effects of taxes on fossil fuels on firms’ environmental and economic performance

Abstract: This thesis evaluates whether taxes on fossil fuel use have decreased firms’ carbon intensity and whether carbon pricing has negatively affected firms’ economic performance. This is done using a firm level panel dataset, covering all firms in the mining, manufacturing and energy sectors in Sweden active during 2008-2018. The results indicate that increasing the marginal cost of taxes on fossil fuel use has led to a decrease in firms’ carbon intensity. Moreover, no robust effects of the taxes on firms’ profits and employment per unit of output are identified. This thesis thus provides further empirical evidence of the environmental effectiveness of carbon pricing policies, as well as adds to the previous literature finding insignificant effects of carbon pricing on firm level indicators of competitiveness.