The Effects of the EU ETS on Pollution Abatement Investments

Abstract

This paper investigates the causal effect of the European Union's Emissions Trading Scheme (EU ETS) on pollution abatement investments, relying on firm-level panel data from the French manufacturing industry between 2001 and 2016. First, I find that regulated firms increased their investments that tackle air emissions after 2008, which may be associated with the adoption of low-carbon technologies. Second, the EU ETS modified the firms' investments that mitigate other forms of pollution, such as the generation of waste, or land and water emissions. The EU ETS may thus have had ancillary effects on the firms' pollution levels.