This thesis examines the informational efficiency of the European carbon market based on the European Union Emissions Trading Scheme (EU ETS). The issue is approached from three different perspectives. I explore whether the volatility embedded in carbon options is a rational forecast of subsequently realized volatility. Then, I investigate if, and to what extent, new information about the structural and institutional set-up of the market impacts the carbon price dynamics. Lastly, I examine whether the European carbon market is relevant for the firm valuations of covered companies. First, perhaps because the market is new and derivatives’ trading on emission allowances has only started recently, carbon options have not yet been extensively studied. By using data on options traded on the European Climate Exchange, this thesis examines an aspect of market efficiency which has been previously overlooked. Market efficiency suggests that, conditional upon the accuracy of the option pricing model, implied volatility should be an unbiased and efficient forecast of future realized volatility (Campbell et al., 1997). Black (1976) implied volatility and implied volatility estimates directly surveyed from market participants are used in this thesis to study the information content of carbon options. Implied volatility is found to be highly informative and directionally accurate in forecasting future volatility. There is no evidence, however, that volatility embedded in carbon options is an unbiased and efficient forecast of future realized volatility. Instead, historical volatility-based forecasts are shown to contain incremental information to implied volatility, particularly for short-term forecasts. In addition, this thesis finds no evidence that directly surveyed implied volatility estimates perform better as a forecast of future volatility relative to Black’s (1976) estimates. Second, the market sensitivity to announcements about the organizational and institutional set-up of the EU ETS is re-examined. Despite their importance for the carbon price formation, demand-side announcements and announcements about the post-2012 framework have not yet been researched. By examining a very comprehensive and updated dataset of announcements, this thesis adds to the earlier works of Miclaus et al. (2008), Mansanet-Bataller and Pardo (2009) and Lepone et al. (2011). Market participants are found to rationally incorporate new information about the institutional and regulatory framework of the emissions trading scheme into the carbon price dynamics. However, they seem to be unable to accurately assess the implications of inter-temporal banking and borrowing on pricing futures contracts with different maturities. The impact of macroeconomic conditions on the market responsiveness is investigated by splitting the dataset into subsamples according to two alternative methods: 1) a simple split into pre-crisis and full-crisis time periods, and 2) according to a Bai-Perron structural break test. Evidence is found that in the context of economic slowdown and known allowances oversupply, the relationship between the carbon price and its fundamentals (institutional announcements, energy prices and extreme weather) breaks down. These findings are consistent with the arguments in Hintermann (2010), Keppler and Mansanet-Bataller (2010) and Koop and Tole (2011) that carbon price drivers change in response to the differing context of the individual trading periods. Third, the role of carbon performance in firm valuation is understudied. Since companies were not obliged to disclose their carbon emissions prior to the launch of the EU ETS, there exists little empirical evidence of the effect of carbon performance on market value. Earlier studies of the European carbon market have only focused on the impact of ETS compliance on the profitability and competitiveness of covered companies (e.g. Anger and Oberndorfer, 2008). There is also little research on how the newly available emissions data has altered the carbon performance of companies. This thesis addresses these gaps in the literature by examining the stock price reactions of British and German firms on the day of verified emissions release under the EU ETS over the period 2006 – 2011. An event study is conducted using a Seemingly Unrelated Regressions model to deal with the event clustering present in the dataset. Limited evidence is found that investors use information about the carbon performance of companies in their valuations. The information contained in the carbon emissions reports is shown to be somewhat more important for companies with high carbon-intensive operations. This thesis finds no conclusive evidence that the cap-and-trade programme has been able to provide regulated companies with enough incentives to de-carbonize their operations. The market does not punish companies which continue to emit carbon at increasing rates or reward companies which improve their carbon performance. In brief, the results of the thesis suggest that the market is not fully efficient yet. Inefficiently priced carbon options may allow for arbitrage trades in the market. The inability of investors to incorporate rules on inter-temporal banking and borrowing of allowances across the different trading periods leads to significant price reactions when there should be none. A recessionary economic environment and a known oversupply of emission allowances have led to a disconnect between the carbon price and its fundamental drivers. And, lastly, the signal embedded in the carbon price is not strong enough to invoke investor action and turn carbon performance into a standard component of investment analysis.

The main aim of this thesis is to show how emission allowances for carbon dioxide work in the emission control system of the European Union. The first and second chapters explain global warming, give a summary of views on how to solve environmental pollution using economic instruments and inform about the first summit climate changes in 1992 in Rio de Janeiro. The third and fourth chapters discuss the origin and development of the European Union Emissions Trading Scheme (EU ETS) and other climate summits that were held between 2007 - 2015. The analytical part of my thesis deals with the third trading period of the EU ETS, the factors affecting the price of allowance and the measures resulting from global climate conferences. In this part I verify whether it is possible for climate conferences to be considered trend that moves the entire demand curve. This premise was tested with the aid of hypothesis: "In the period of the climate conference increases price of allowance." This hypothesis was examined on the basis of the condition ceteris paribus and the result of this thesis is the fact that conferences don't influence price of allowance. The results indicate that the price of allowance is probably influenced by other factors that were not the subject of my analysis.

Dans le cadre de cette thèse, nous nous interrogeons sur la concurrence que peut potentiellement apporter les recycleurs sur un marché des matières premières traditionnellement dominé par un oligopole minier. Dans quelle mesure les recycleurs peuvent-ils concurrencer les firmes minières et quels sont les effets sur l'oligopole? Comme deuxième axe de recherche, nous tenons compte du différentiel d'externalités environnementales qui existe entre les deux types d'offre. Nous intégrons donc dans notre modèle une subvention au recyclage ainsi qu'une taxe sur la pollution minière, ceci, en réponse aux deux distorsions de marché que sont la structure non concurrentielle de l'extraction minière et les externalités qui sont associées à cette activité. Pour donner une dimension empirique à cette thèse, nous utilisons les marchés du minerai de fer et de l'acier. Préalablement à l'analyse de la concurrence avec les recycleurs, nous effectuons dans le cadre du Chapitre 1, une analyse de l'évolution des marchés du fer et de l'acier suite au choc de demande des années 2000. La concentration de la demande autour des sidérurgistes chinois ainsi que la stratégie mise en place par les autorités à partir de 2010, aboutissent à l'existence d'un monopsone contrarié sur le marché mondial du minerai de fer.En se recentrant sur l'amont de la chaîne de valeur, notre Chapitre 2 pose le cadre théorique de la concurrence entre les entreprises minières et les recycleurs. A travers un modèle Cournot-Stackelberg, nous montrons que la part de marché du secteur minier augmente avec le degré de concurrence de ce secteur. Les recycleurs ne peuvent en effet pas augmenter de manière significative leur part de marché si une technologie de recyclage efficace n'est pas, dans le même temps, associée à une importante disponibilité de déchets. Cette double condition est également nécessaire pour garantir la diminution de la rente minière. Par ailleurs, nous mettons en avant l'existence d'un niveau de technologie de recyclage minimum pour que les recycleurs puissent entrer sur le marché. La prise en compte du différentiel d'externalités environnementales dans le Chapitre 3 renforce la nécessité d'une augmentation de l'offre de matières secondaires, au regard de son effet bénéfique sur le bien-être. L'instauration d'une taxe environnementale sur la production minière s'avère, à cet effet, moins pertinente qu'une subvention au recyclage. La taxe renforce la contrainte de capacités pour les recycleurs, repose sur une nécessaire évaluation de la pollution minière difficile à réaliser pour certaines matières premières, et des limites quant à sa mise en œuvre semblent également se poser. A l'inverse, l'instauration d'une subvention au recyclage aurait des effets significatifs sur les parts de marché des recycleurs et sur la nécessaire baisse des dommages liés à l'extraction. Comme nous le montrons, la différence d'effets entre les deux politiques est d'autant plus forte lorsque le niveau de recyclage initial est faible. Enfin, en s'intéressant à une politique publique axée sur la demande de matières plutôt que sur l'offre, le Chapitre 4 met en exergue la faible incitation du marché européen du carbone sur la baisse des émissions de CO$_2$ des sidérurgistes, et donc sur un potentiel recours accru à la matière secondaire. Nous montrons également comment cette politique climatique interfère avec la politique de concurrence car elle bénéficie essentiellement aux leaders du marché, au détriment du principe de concurrence libre et non faussée qui prévaut au sein du marché commun. Plus surprenant, nos résultats indiquent que le leader du marché est la firme la moins efficace dans la consommation de matières premières, par rapport à la quantité d'acier produite et aux émissions de CO2 générées. A l'inverse, la firme qui semble être la plus efficace est, dans le même temps, celle qui aurait été la moins avantagée dans l'attribution des quotas gratuits depuis 2007. / In addition to a solution for managing end-of-life products, recycling is also an alternative to the production of virgin raw materials. In this thesis, we are therefore wondering about this new form of competition that could potentially include recyclers, on a commodity market traditionally dominated by a mining oligopoly. To what extent can recyclers compete with mining firms and what are the effects on oligopoly? As a second line of research, we consider the differential of environmental externalities that exists between the two types of supply. We therefore include in our model a recycling subsidy and a tax on mining pollution, in response to the two market distortions: the non-competitive structure of mining extraction and the externalities that are associated with this activity. To give an empirical dimension to this thesis, we use the iron and steel industry. Prior to the analysis of the competition with recyclers, we carry out in Chapter 1, an analysis of the evolution of the markets of iron and steel following the demand shock since the year 2000. The concentration of the demand from Chinese steelmakers as well as the strategy put in place by the authorities from 2010, led to a new market structure of the world iron ore market: a thwarted monopsony.By focusing on the upstream value chain, Chapter 2 sets the theoretical framework for competition between mining firms and recyclers. Through a Cournot-Stackelberg model, we show that the market share of the mining sector increases with the degree of competition in this sector. Recyclers cannot significantly increase their market share if an efficient recycling technology is not associated with a high availability of waste. This dual condition is also necessary to ensure the reduction of the mining rent. In addition, we highlight the requirement of a minimum level of recycling technology for recyclers to enter the market.Taking into account the differential of environmental externalities in Chapter 3 strengthens the need for increasing the supply of secondary materials, with regard to its positive effect on social wellfare. For this purpose, the introduction of an environmental tax on mining extraction is less relevant than a subsidy for recycling. The tax reinforces the capacity constraint for recyclers, relies on a necessary assessment of mining pollution that is difficult to achieve for certain raw materials, and there are limits on its implementation which also seem to arise. On the other hand, the introduction of a recycling subsidy would have a significant impact on recyclers' market share and the necessary reduction of extraction-related damages. As we show, the difference in effects between the two policies is even stronger when the initial level of recycling is low.Finally, by focusing on a public policy based on the demand for materials rather than on supply, Chapter 4 highlights the weak incentive of the EU-ETS to reduce CO2 emissions from steelmakers, and therefore a potential increase of the secondary input instead of the virgin one. We also show how this climate policy interferes with the EU competition policy because it mainly benefits market leaders, to the detriment of the principle of free and undistorted competition prevailing in the EU market. More surprisingly, our results indicate that the market leader is the least efficient firm in the consumption of raw materials, considering the quantity of steel produced and the CO$_2$ emissions generated. Conversely, the firm that seems to be the most efficient would also have been least favoured when free allowances were allocated from 2007 onwards.

The aim of this study is to examine the effects of a market-based greenhouse gases price on green innovation by testing the Hicksian theory of induced innovation. To test whether causality exists, panel data compiled of 30 countries over 13 years (2005-2017) have been used. The study is restricted to the European Union emission trading scheme, where the price of EUA has been used as a market-based price for greenhouse gases. To capture the effect on innovation, an approximation for innovation in the form of patent counts have been employed using the patent category Y02 constructed by the EPO. The result suggests that green innovation is affected by the price of the EUA, total CO2 emissions and tax revenue from energy. This study employed a knowledge stock variable that was not found to be significant, contrary to previous literature on induced innovation. The incidence rate ratio associated with the  permits price indicates that a one euro increase in price would result in a 1.135 % increase in the patenting of green technology. The result suggests that a higher price in  permits would stimulate innovation of green technology within the European Union.

<div>This dissertation consists of three chapters about the European Union Emissions Trading Scheme (EU ETS). All chapters contributes to the scarce but recently great developing literature on installation and firm-level studies in the EU ETS. The first chapter evaluates the policy effectiveness and efficiency by theoretical modelling and</div><div>empirical assessment of firms’ emission abatement activities. The second chapter overviews the global emission trading market, documents the institutional background</div><div>of emission trading, and analyzes firms’ emission trading patterns in light of the broader empirical literature. The last chapter studies productivity and firms’ emission</div><div>permit trading behaviors by considering a complete set of options. In the first chapter, I investigate how firms reduce emissions under continuous adjustment of the policy by using the implementation of the three phases of EU ETS</div><div>as a cost shock. I develop a model of emission abatement with heterogeneous firms by introducing two channels: Reallocation and Investment which incur variable and</div><div>fixed abatement costs respectively. More productive firms are cleaner as they put more effort on Investment. However, the policy effect is ambiguous driven by the magnitude</div><div>and correlation of the proposed abatement technology parameters, which highlights the importance of the current abatement technology for firms’ responses to climate</div><div>policy. I then empirically test the model by using a novel dataset that matches firms’ financial, production and emission data. In addition to providing the elasticity of</div><div>emission intensity, the elasticity of Reallocation and Investment, the model enabled me to estimate the firm’s abatement technology parameters and decompose the emissions into the proposed two channels. The results indicate that firms have a higher efficiency on abatement in utilizing of inputs than green technology investment. The emission change is primarily driven by the channel of Reallocation and is concentrated in non-metallic</div><div>mineral companies. The green innovation is limited under the policy with a small emission intensity decrease even though there is large emission reductions. The second chapter reviews the global rise of emission trading, documents the institutional background of emission trading, and summarizes firms’ emission trading patterns. To the best of my knowledge, this study is one of the first to empirically analyze the trading behaviors of all ETS firms covering all three phases in the EU ETS. I use two micro-level datasets to investigate the permit trading behaviors of all types of trading in the market, including international offset permits. Some explanations of the identified trading patterns are provided in this paper. Additionally, this study also discusses the patterns in light of the broader empirical literature. The last chapter contributes to the literature on the firms’ permit trading behaviors. The development of the EU ETS has complicated firms’ decisions around carbon trading and offered firms more options to offset emissions. We provide a first look at the determinants behind firms’ participation in the EU ETS as well as their trading behaviors by considering a complete portfolio of permit trade markets</div><div>in the EU ETS. Based on a comprehensive permit transaction dataset linked with individual level firm’s characteristics, we quantitatively analyze firms’ participation</div><div>decisions and trading patterns. We focus on the impact of firms’ productivity, endowment position, and endowment value on market choice and trading amount. Our</div><div>results suggest that productive firms are more likely to participate in permits trading and to purchase the permits in the secondary and international markets. Conditional</div><div>on firms’ market choice, the permit trading amount is also correlated with a firm’s productivity and endowment value. In addition, firms in power and energy sector are</div><div>more likely to participate in permit trading than other manufacturing firms. Overall, the empirical results indicate that less productive firms have disadvantages competing</div><div>in the permit trade market.</div>

Sverige är idag beroende av en säker tillgång till energi och att detta sker till konkurrenskraftiga priser. Trots att det finns både ny teknik och styrmedel för energieffektivisering så har inte den kostnadseffektiva energieffektiviseringspotentialen realiserats fullt ut. Industrin påverkas av ett antal styrmedel inom klimat- och energiområdet, som har relevans för energieffektiviseringar. Det handlar t.ex. om energi- och koldioxidskatter, utsläppshandelssystemet, elcertifikatsystem samt Programmet för energieffektivisering (PFE). Det råder idag en oenighet om styrmedel ska utformas som en morot eller piska för energieffektiviseringsarbetet. Detta examensarbete har tillkommit i syftet att undersöka styrmedel för att genomföra energieffektiviseringar inom den svenska industrin. Syftet är också att identifiera tänkbara möjligheter och hinder samt ge förslag på åtgärder till förändringar för att förbättra energieffektiviseringsarbetet. Examensarbetet sker också som en del av Kungliga Ingenjörsvetenskapsakademins (IVA) projekt ”Ett energieffektivt samhälle”. Undersökningen bygger på intervjuer med företrädare för företag, intresseorganisationer, myndigheter och andra oberoende aktörer med koppling till industrin. En litteraturstudie över nuvarande styrmedel och dess påverkan på den svenska industrin samt en internationell utblick har gjorts. Programmet för energieffektivisering (PFE), Energikartläggningscheckar (EKC), Miljöbalken, Ekodesign direktivet (ErP), Energi- och koldioxidskatter, Utsläppshandelsystemet (ETS) och Elcertifikatsystemet påverkar energieffektiviseringsarbetet inom industrin. Studien har visat att inget styrmedel har en total genomslagskraft på industrins aktörer. Frivilliga PFE med tydliga ekonomiska incitament och den tvingande ErP med krav på produkt och märkning anses vara ett bra och väl fungerande styrmedel. EKC kan förbättras med större incitament för de deltagande företagen. Miljöbalken kritiseras för tolkningsproblem och utdragna tillståndsprocesser. Industrins konkurrenskraft påverkas negativt av ökade skatter och ETS medan styrmedel som PFE och EKC har en positiv marknadspåverkan. Endast PFE och Miljöbalken har krav på att ett kontinuerligt energiarbete. Inget av de studerade styrmedlen är långsiktigt utformade, då det sker en kontinuerlig förändring av dessa genom antingen tolkning eller tillämpning. Bristfällig kunskap om energieffektiviseringar och den potential som finns för företaget att genomföra arbetet är ett stort hinder. En viktig drivkraft är därför att det finns ett tydligt informationsincitament där det klart framgår vinster med åtgärden dvs. att målet styr medlet. Resursbrister i organisationen, både vad gäller humankapital och av finansiell art, utgör hinder. Den främsta finansiella drivkraften för energieffektiviseringsinvesteringar är att det ger en avkastning på investeringen, vilket i längden bidrar till ett bättre resultat för företaget. Problem med differentierade regler och osäkerheten i att medverka i företagsöverskridande samarbeten är ett hinder. Möjligheten till att erhålla konkurrensfördelar, är den främsta drivkraften till ett utökat effektiviseringsarbete. Snedvridningar av konkurrensen och kortsiktig planering är hinder. En viktig drivkraft till energieffektiviseringslösningar inom energimarknaden är om det ger kostnadseffektiva lösningar för företaget och samhället i stort. Vad som är samhällsekonomiskt lönsamt är dock inte automatiskt företagsekonomiskt lönsamt. Myndigheter och företag behöver tillhandahålla klara och tydliga riktlinjer för energieffektiviseringar och uppföljning av arbetets genomförande samt redovisa vilka samhällsekonomiska och företagsekonomiska vinster som kan erhållas. Myndigheter måste ge stöd till samhällsviktiga investeringar och tillse att dessa inte påverkar konkurrenssituationen på marknaden. Långsiktighet, kostnadseffektivitet, teknikneutralitet samt att legitima aktörer deltar i processen är andra viktiga faktorer. Företag bör se till att den finansiella strukturen anpassas till att prioritera energieffektiviseringsarbetet. Industrin bör eftersträva ett kontinuerligt och långsiktighet effektiviseringsarbete genom att t.ex. lyfta fram nya nyckeltal samt att uppmuntra anställda att vara delaktiga i utvecklingsprocessen. Samarbeten, i form av samproduktion mellan universitet och högskolor, olika forskningsinstitutet, intresseorganisation och de enskilda företagen ska premieras för ökat kunskapsutbyte och minskade kostnader vad gäller effektiviseringsarbetet. Den svenska industrin påverkas således av ett antal styrmedel inom energiområdet. Hinder och drivkrafter kan indikera kravnivåer utifrån vilka konkreta åtgärder kan vidtas, som behövs för ett framgångsrikt energieffektiviseringsarbete. Viktigt blir att identifiera möjligheter och hinder samt att föreslå konkreta åtgärder till förändringar inom olika sektorer. Den centrala frågan i denna studie är om styrmedel ska vara utformat som en piska eller morot? Forskningen vad gäller energieffektiviseringar visar på att en kombination av frivilliga, tvingande och ekonomiska styrmedel behövs för en gynnsam utveckling. Aktörer med skilda intressen och förutsättningar kräver en mångfald av åtgärder som både lockar och om nödvändigt pushar aktörerna till energieffektiviseringsarbete. Respondenterna delar denna uppfattning men tillägger att om inte heterogeniteten bland aktörerna uppmärksammas fullt ut finns en fara att energieffektiviseringsarbetet missgynnas när industrin kan komma att utlokalisera till andra delar av världen för att undgå tvingande regler eller pålagor. Således kan följande slutsats dras av det anförda nämligen att den initiala frågan om styrmedel som ”piska eller morot” måste omformuleras till ett konstaterande. För ett effektivt energieffektiviseringsarbete måste både styrmedel i form av piska och morot kombineras och en bredare syn på begreppet energieffektivisering ske.  Det viktiga är en anpassning och en väl avvägd kombination av styrmedel för att gynna både energieffektiviseringsarbetet, industrin och samhället i stort. / Our nation is dependent on secure energy supply at competitive prices. Even though energy efficiency tools are available Sweden hasn’t achieved its full potential. The Swedish industry and its energy efficiency is affected by a number of instruments concerning climate and energy, such as energy- and carbon taxes, the European emission trading system (EU ETS) and the Swedish program for energy efficiency (PFE).  Optional or obligatory, today there is a difference of opinion concerning the design of energy efficiency instruments. This paper focus on the research of energy efficiency instruments in the industry and to identify potential opportunities, obstacles and give recommendations of actions to improve the energy efficiency. This paper is a part of a project,”Ett energieffektivt samhälle”,   initiated by the Royal Swedish Academy of Engineering Sciences (IVA).  The research is based on interviews with industry related representatives of companies, associations, government agencies and other independent operators. PFE, EKC, the environmental code, ErP, energy- and carbon taxes, ETS and the Swedish system of electricity certificates, influences the energy efficiency work. None of these instruments have an overall impact on the industry. PFE and ErP are popular instruments but EKC has to improve to be an incentive for the industry.  The environmental code is criticized for its interpretation and enforcement. Competitiveness is adversely affected by taxes and ETS in contrary to PFE and EKC. Continuously energy work is only required by PFE and the environmental code. Both authorities and companies have to provide clear guidelines, follow-ups and the gains to be obtained of the energy efficiency work. Authorities have to support critical investments and to avoid interfering with the competition on the market. Long-term planning, cost-effectiveness, technology neutrality and being a legitimate stakeholder is of vital importance. Companies have to provide the financial structure suited for energy efficiency work. They also have to apply a continuous and long-term efficiency work, for example by highlighting new ratios and to encourage employees to participate in the development process. Collaboration in the form of co-production between different universities, institutes, lobby-associations and companies have to be encouraged to improve knowledge exchange and reduced costs. The question is if energy efficiency instruments should be based on “the stick or carrot approach”? Research about energy efficiency shows, that a combination of voluntary, mandatory and economical instruments is absolutely necessary for a favourable development.  Parts with different interests and qualifications demands a number of arrangements that both is a “stick and a carrot approach” to a necessary energy efficiency work.  Many of the participants in the study underline the importance to address the heterogeneity of the parts otherwise it will disfavour the energy efficiency work when the industry moves abroad. Actually the following conclusion could be made, that the initial question about the “stick or carrot approach” must be put in a different way. About an effective energy efficiency work it’s absolutely necessary to create a combination of both “the stick and the carrot” approach and the wider look on the concept energy efficiency. It’s most important to have a very well done combination and harmonization of the instruments to support the energy efficiency work, the industry and the society at large. / Ett energieffektivt samhälle - delprojekt Industri

Europeiska kommissionen har inom ramen för klimatmålen 2030 inrättat två politiska styrmedel, handelssystemet (EU ETS) och förnybarhetsdirektivet (2009/28/EC), för att reducera koldioxidutsläpp. Tidigare studier inom ämnet riktar dock viss kritik mot denna form av kombination och menar att införandet av förnybarhetsdirektivet har en motverkande effekt för priset på utsläppsrätter. Studien ämnar därmed att undersöka om handelssystemet och förnybarhetsdirektivet utgör en målkonflikt. Till följd av att studien inkluderar en interaktionsvariabel i en panelregression med fixa effekter, kan ytterligare belägg för det negativa förhållandet mellan 2009/28/EC och EU ETS adderas. Undersökningen baseras på paneldata över tidsperioden 1990–2018 från 35 OECD länder, och finner att interaktionsvariabeln antar ett positivt och signifikant värde. Resultatet tyder därmed på att 2009/28/EC har en motverkande effekt på handelssystemet. Vidare visar även resultatet att 2009/28/EC har en större negativ påverkan för länder som understiger det nationella förnybarhetsmålet, än för länder som överstiger målet. Studien tillför således vidare insikter om att en målkonflikt kan föreligga.

This thesis examines the environmental effect of the European Union Emissions Trading Scheme (EU ETS) in the Czech Republic. Specifically, the impact of the EU ETS on CO2 emissions, carbon-fuel intensity and carbon intensity of production (measured by revenues) is analysed on installation-level financial, environmental and energy data throughout all three phases of the EU ETS over 2005 - 2019. The difference-in-differences approach with propensity score matching is used to infer the causal effect of the regulation. We find no effect of the EU ETS on carbon emissions and carbon intensities in the Czech Republic. This finding holds for various model specifications and different approaches we utilised. In the end, we discuss possible reasons why the EU ETS might not lead to any significant effect in the Czech Republic. JEL Classification O13, F18, Q54, Q58, H23, D22 Keywords EU ETS, environmental regulation, propen- sity score matching, difference-in-differences, the Czech Republic Title The impact of the EU ETS in the Czech Repub- lic

The European Emissions Trading Scheme (EU ETS) aims to lower greenhouse gases inpollution-intensive industries. The success of the EU ETS, its policy framework and its pricingstrategy is both empirically acknowledged and disputed. The study contributes to the empiricalresearch on the effect of the price of EU ETS permits on carbon emissions. Therefore, the aimis to establish the relationship between the price of emission permits and CO2 emissions inrelation to each phase of the EU ETS, for Sweden and Finland with a focus on the Pulp andPaper Industry (PPI). Moreover, the focus lies on the difference in the effect of each EU ETSphase on CO2 emissions, allowing for discussion on the effectiveness of each phase. Using aNewey-West multiple linear regression analysis, we found statistically significant evidence thatduring Phase 3, EU ETS permit pricing had a negative effect on CO2 emissions for both Swedenand Finland, EU ETS permit pricing in Phase 1 seems to have a low positive effect on CO2emissions solely for Sweden, while Phase 2 does not have an effect on CO2 emissions for eithercountry. Our collected data implies some degree of ineffectiveness and uncertainty in thesuccess of the EU ETS framework and pricing strategy.

This thesis studies the effect on labour demand of a transition from an unconstrained economy featuring a ’clean’ and a ’dirty’ production method towards a fully clean economy, using a simplified General Equilibrium model. This model is calibrated to the European Union Emission Trading System (EUETS) and features a linear decline in a cap placed on the dirty production method. After simulating the trajectory set by the EU ETS, this study finds that wages are expected to increase by 11.68% over the transition period in the baseline scenario. This result is found to hold qualitatively both for steeper transitions and wide ranges of the elasticity of substitution and consumer preference in consumption, as long as clean productivity growth is sufficientand the consumer is either indifferent or favours the clean consumption good. The minimum level of clean productivity growth needed to achieve a long-runincrease in wages is found to be slightly below 2% per year, even when the cap on dirty production faces a steeper decline.