Lessons from the EU Effort Sharing Decision for supranational climate cooperation: a firm-level analysis

As an example of supranational climate policy coordination for sectors not covered by
carbon trading, the European Effort Sharing Decision set national targets for emission
reductions for the time period 2013–2020. Member States were free to decide the national
policies to implement to achieve these objectives. This is the first quantification of the
impact this regulation had on the emissions of firms in the corresponding sectors. We ex-
ploit the differences along three variables: a national-level treatment intensity, an exposure
index defined at the firm level and a time dimension (before or after the introduction of the
policy). We find that, even in countries with no stringent target, emissions from exposed
firms tended to decrease more than emissions from non-exposed firms. In addition, each
percentage point increase in the stringency of the treatment leads to a 5.7% reduction in
emissions for an average exposed firm. This provides interesting insights for other supra-
national climate agreements.

Gavard, Claire and Lukas Diethelm (2015), Lessons from the EU Effort Sharing Decision for supranational climate cooperation: a firm-level analysis, Environmental and Resource Economics