Sweden was one of the first countries to introduce a carbon tax in 1991. Authors assemble a unique dataset tracking all CO2 emissions from the Swedish manufacturing sector to estimate the impact of carbon pricing on firm-level emission intensities. In panel regressions, spanning 26 years and around 4,000 firms, we find a statistically robust and economically meaningful negative relationship between emissions and marginal carbon pricing. We estimate an emission-to-pricing elasticity of around two, albeit with substantial heterogeneity across manufacturing subsectors. A simple calibration implies that 2015 CO2 emissions from Swedish manufacturing would have been roughly 30% higher without carbon pricing.
By Gustav Martinsson, László Sajtos, Per Strömberg, Christian Thomann
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