An Empirical Analysis Of The Impact On Company Investments

The European Union’s Emissions Trading Scheme (EU ETS) is so far the largest emissions trading system in the world. A demanding ex-post empirical analysis of the structure is presented. The effect of the structure on firms’ investment decisions in carbon-reducing technologies is analyzed by using comprehensive firm-level data from Swedish industry. Based on difference-in-difference estimation as well as a before-after difference estimation, the results show that the EU ETS has not had a significant effect on companies’ decisions to purchase carbon-mitigating technology.

However, even though the EU ETS appears to have no direct influence on investments, it is too early to dismiss the system. Consideration is given to how the EU ETS can realize its potential to get a highly effective tool in the EU climate and energy policy portfolio. A thorough analysis and conversation consider the power of the EU ETS to generate strong incentives for investment in carbon-reducing measures. The empirical results (using comprehensive firm-level data from Swedish industry) increase earlier results in the literature showing the restrictions of the EU ETS to impact investments and invention. That is a critical and pressing issue for policy makers. With even modest reforms such as the back-loading of allowances meeting strong resistance from some known member States, the continuing future of the EU ETS is put in question rightly.

Politics confuse policy debates and more often than not lead to programs which have weaknesses in design and in execution. Reactions to crises must be purposeful and full of energy, even if they are sometimes ineffective. One of the most serious risks in the foreseeable future lie in accumulations of financial risk that can suddenly trigger an avalanche that causes much damage before it runs its course. Global market operates can only just be halted with substantial liquidity assistance that can only come from government authorities, and Ben Bernanke arranged a durable precedent about how to provide it.

Meanwhile, several other important issues remain unresolved after a decade. Are we satisfied that the best way to assess the credit quality of marketable tools is through a little number of banking organizations paid by those they rate? What’s to be the continuing future of the federal casing entities, FNMA and FMAC? How is the federal government to unwind its position in AIG?

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Is the FDIC to be fortified and ready to intervene in large bank failures? And perhaps most important, has the curtailment of risk consuming the wide global banking sector affected the private sector’s ability to fund new entrepreneurial activity, growth and innovation? During his presidential campaign, Mr. Trump guaranteed to repeal or revise Dodd Frank, but has not done so, nor does there appear to be much energy to doing so in the future.

The other issues never have been addressed. Most likely, the next few years won’t involve important new regulatory changes. Few observers, however, believe that the regulatory composition we have now will end financial crises in the foreseeable future. As hard as these are to predict, it is even harder to predict where they will come from and how they’ll impact the structures we’ve in place to absorb them. Fund has been like this always, but we do learn from what we go through.