The effect of climate policy on productivity and cost pass-through in the German manufacturing sector
Open accessAbstract
We investigate productivity and cost pass-through of German manufacturing firms using administrative data from 2001 to 2014. Our framework allows for the estimation of quantity-based production functions for multi-product firms while controlling for unobserved productivity shocks and unobserved input quality. Using our parameter estimates, we can compute total factor productivity, markups and marginal costs. We find no effect of the EU ETS on firm productivity or profits for the whole sector, and a positive effect for some industries. Firms pass on shocks to materials costs completely, or even more than completely, whereas pass-through of energy costs is around 35-60%. Although pass-through of energy costs is incomplete, it nevertheless allowed firms to recover more than their total carbon costs due to generous free allocation of allowances. Our results add to the recent literature concerning the causal effects of climate policy on firms and are relevant for policy makers when defining the level of free allowance allocation to industry.
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The extent to which companies can pass through costs to prices is usually linked to the sensitivity of demand and supply to price and the degree of competition, which in turn depends on multiple factors including trade barriers and global excess capacity.
“The extent to which companies can pass through costs to prices is usually linked to the sensitivity of demand and supply to price and the degree of competition, which in turn depends on multiple factors including trade barriers and global excess capacity”
From Carbon Leakage, Consumption, and Trade (2022) · cites this paper as [39]
The likely extent of pass-through can be very hard to estimate.
“the likely extent of pass-through can be very hard to estimate (37-39).”
From Carbon Leakage, Consumption, and Trade (2022) · cites this paper as [39]
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References 8 · Cited by 7
- Authors
- Hintermann, B., Zarkovic, M., Di Maria, C., & Wagner, U. J.
- Venue
- WWZ
- Publisher
- WWZ
- Published
- 2020
- OpenAlex
- W3120364834
- Cited by
- 7
- References
- 8
- Citations by year
- 2025: 1 · 2024: 3 · 2022: 3
- Type
- report
- Language
- en
- Open access
- green
- edoc.unibas.ch
- Licence
- other-oa
- Locations
- edoc (University of Basel) (submittedVersion, other-oa)
- RePEc: Research Papers in Economics (submittedVersion)
- Econstor (Econstor) (submittedVersion)
- edoc (University of Basel)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Climate Change Policy and Economics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Energy, Environment, Economic Growth
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Merger and Competition Analysis
- Keywords
- climate policy, EU Emissions Trading System, carbon pricing, total factor productivity, cost pass-through, manufacturing companies, energy costs, material costs, markups, marginal cost, free allowance allocation, carbon leakage, German manufacturing sector
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