title: Carbon prices and incentives for technological development.
abstract: There is concern that the carbon prices generated through climate policies are too low to create the incentives necessary to stimulate technological development. This paper empirically analyzes how the Swedish carbon dioxide (CO2) tax and the European Union emission trading system (EU ETS) have affected productivity development in the Swedish pulp and paper industry 1998-2008. A Luenberger total factor productivity (TFP) indicator is computed using data envelopment analysis. The results show that climate policy had a modest impact on technological development in the pulp and paper industry, and if significant it was negative. The price of fossil fuels, on the contrary, seems to have created important incentives for technological development. Hence, the results suggest that the carbon prices faced by the industry through EU ETS and the CO2 tax have been too low. Even though the data for this study is specific for Sweden, the models and results are applicable internationally. When designing policy to mitigate CO2 emissions, it is vital that the policy creates a carbon price that is high enough - otherwise the pressure on technological development will not be sufficiently strong.
authors.affiliation: CERE, Centre for Environmental and Resource Economics, Umeå University, 901 87 Umeå, Sweden; SLU, Swedish University of Agricultural Sciences, 901 83 Umeå, Sweden.
authors.forename: Tommy
authors.initials: T
authors.lastname: Lundgren
authors.affiliation: CERE, Centre for Environmental and Resource Economics, Umeå University, 901 87 Umeå, Sweden; CERUM, Centre for Regional Science, Umeå University, 901 87 Umeå, Sweden. Electronic address: pelle.marklund@umu.se.
authors.forename: Per-Olov
authors.initials: PO
authors.lastname: Marklund
authors.affiliation: NIER, National Institute of Economic Research, Box 3116, 103 62 Stockholm, Sweden.
authors.forename: Eva
authors.initials: E
authors.lastname: Samakovlis
authors.affiliation: CERUM, Centre for Regional Science, Umeå University, 901 87 Umeå, Sweden.
authors.forename: Wenchao
authors.initials: W
authors.lastname: Zhou
mesh_terms: D000397:Air Pollution / Q000517:prevention & control*; D002245:Carbon Dioxide / Q000032:analysis*; D057217:Economic Development; D006801:Humans; D007220:Industrial Waste / Q000191:economics* / Q000331:legislation & jurisprudence; D008962:Models, Theoretical; D010209:Paper; D013548:Sweden; D013660:Taxes
chemical_list: D007220:Industrial Waste; D002245:Carbon Dioxide
keywords: CO(2) tax; EU ETS; GMM; Luenberger total factor productivity indicator