Working paper

Assessing the impact of the EU ETS using firm level data

Publishing date
15 July 2011

This paper investigates the impact of the European Union’s Emission Trading System (EU ETS) at a firm level. Using panel data on the emissions and performance of more than 2000 European firms from 2005 to 2008, we are able to analyse the effectiveness of the scheme.

The results suggest that the shift from the first phase (2005-2007) to the second phase (2008-2012) had an impact on the emission reductions carried out by firms. The initial allocation also had a significant impact on emission reduction. This challenges the relevance for the ETS of Coase’s theorem (Coase, 1969), according to which the initial allocation of permits is irrelevant for the post-trading allocation of marketable pollution permits.

Finally, we found that the EU ETS had a modest impact on the participating companies’ performance. We conclude that a full auctioning system could help to reduce emissions but could also have a negative impact on the profits of participating companies.

About the authors

  • Georg Zachmann

    Georg Zachmann is a Senior Fellow at Bruegel, where he has worked since 2009 on energy and climate policy. His work focuses on regional and distributional impacts of decarbonisation, the analysis and design of carbon, gas and electricity markets, and EU energy and climate policies. Previously, he worked at the German Ministry of Finance, the German Institute for Economic Research in Berlin, the energy think tank LARSEN in Paris, and the policy consultancy Berlin Economics.

  • A Ndoye

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