Abstract*

How does carbon pricing affect firms’ investment decisions? We study this question
using unique data on capital investment and the firm-specific cost of emitting CO2 for the Swedish manufacturing sector over the course of two decades. We document a positive connection between the price of carbon and firm investment spending. For firms in the most carbon-intensive sectors, a 10% increase in carbon pricing leads to a 2% increase in investment spending. High-emission firms also increase the share of investments focused specifically on abatement as well as green R&D in response to carbon pricing. Our results imply that pricing CO2 emissions at a sufficiently high level incentivizes brown firms to make green investments.

*Co-authored with J. Brown (Texas A&M School), G. Martinsson (Stockholm University), P. Strömberg (Stockholm School of Economics)

General information:

Attendance to this seminar is possible by invitation only. Please send an e-mail to finsec-abs@uva.nl if your are interested in attending this seminar.