Thursday, November 10, 2011

The Impacts of the Climate Change Levy on Manufacturing: Evidence from Microdata
Abstract: We estimate the impacts of the Climate Change Levy (CCL) on manufacturing plants using panel data from the UK production census. Our identification strategy builds on the comparison of outcomes between plants subject to the CCL and plants that were granted an 80% discount on the levy after joining a Climate Change Agreement (CCA). Exploiting exogenous variation in eligibility for CCA participation, we find that the CCL had a strong negative impact on energy intensity and electricity use. We cannot reject the hypothesis that the tax had no detrimental effects on economic performance and on plant exit.
An August 2009 Working Paper available free of charge at: Paper7 - Martin de Preux and Wagner 2009.pdf reported:

In our most general specification, the treatment effects on CCA plants are economically significant and range from 15% for energy expenditure to between 23% and 29% for energy intensity and electricity use. From this we conclude that the price incentive provided by the CCL led to stronger reductions in energy consumption than the energy efficiency or consumption targets imposed by the CCA. If these targets are not binding, our estimates recover the full impact of the tax disount, otherwise they can be interpreted as a lower bound. The strong effect on electricity consumption is consistent with the fact that the CCL imposes the highest tax rate on this fuel type. Since we do not find evidence of significant reductions in the consumption of other fuels, we conclude that CCA participation had a positive impact on CO2 emission growth on the range of at least 5% and up to 26%.

by Ralf Martin, Laure B. de Preux, Ulrich J. Wagner
National Bureau of Economic Research (NBER)
NBER Working Paper No. 17446; Issued in September 2011

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