The fear that the European carbon market is weighing on company competitiveness is "largely exaggerated". In fact, its "implementation has increased the turnover and the value of the fixed assets of the companies subject to regulation". This is the unanticipated conclusion of a report published on 6 December by the OECD on “the joint impact of the European Union emissions trading system (EU ETS) on carbon emissions and economic performance” (1), covering more than 40% of European Union emissions.
The study analyses the financial data of some 2,000 companies operating European facilities affected by the European carbon market. It compares them with data from unregulated companies of similar size in the same countries (France, Norway, the Netherlands and the United Kingdom), covering more than 8,000 companies.
Earnings 7 to 18% higher than unregulated markets
The study shows that greenhouse gas emissions decreased by 10% over the duration of the study (2005-2012), and that such a reduction did not reduce revenue, profit or employment rates in the companies concerned. At the end of the study period, company "revenues were between 7% and 18% higher than they would have been without the carbon market, and their fixed assets increased by 6% to 10% compared to companies in the control group".
The employment levels and operating profit of the targeted companies were also higher than those of the control group. And the EU ETS has "encouraged targeted companies to invest in carbon reduction technologies, which can boost their productivity".
Counter-intuitive for employers
The study’s findings counteract the arguments of companies that regularly put forth the risk of carbon leakage, orthe relocation of carbon-emitting activities in countries with lower environmental regulations, and in doing so had received certain exemptions or free emission allowances.
Nevertheless, the results of the report remain to be qualified. They represent the first period of the EU ETS, before auctioning off allowances, and it was therefore free for the vast majority of targeted companies. Since then, the price of the carbon tonne has remained low (between €5 and €20 per tonne), but the consequences could be different if prices increase. The price is likely to increase more significantly thanks to market reform adopted last March.
Béatrice Héraud @beatriceheraud