The Effects of climate policy on productivity : An evaluation of emission and energy taxes on industry performance

Abstract: In the struggle against climate change, policymakers are faced with the difficult problem of maintaining economic growth while trying to reduce emissions. This paper studies the effect of the carbon emission tax, EU ETS and energy taxes on Swedish industry productivity between 2009-2018 with the purpose of evaluating the Porter hypothesis. A two-step approaches is used. First, Malmquist indexes are calculated using DEA and analyzed on total factor productivity, efficiency change and technical change. These performance indicators are then regressed on policy variables using OLS with a first difference estimator. Contrary to the Porter hypothesis the evidence does not suggest any effect on productivity, but can induce technical change.