Labour Productivity and Development of Carbon Competitiveness: Industry-Level Evidence from Europe

Abstract

A drastic decline in global greenhouse gas (GHG) emissions is needed to stop the climate change. This requires a variety of political and market mechanisms. Europe is globally at the forefront among the industrialised countries in reducing its GHG emissions. We analyse the development of emission intensities – GHG emissions relative to value added produced – and use a panel data to further our understanding of their evolution at the level of industries in 2008–2020 in Europe. We find that labour productivity is negatively associated with changes in GHG-emission intensities. Furthermore, higher investments, higher carbon prices within the ETS mechanism, and higher environmental taxes are associated with lower GHG-emission intensities. Consequently, policies that promote productivity growth and financial incentives to decrease emissions lead to lower emissions. Finland’s carbon competitiveness, as measured by relative GHG-emission intensities, varies by industries.

See also Etla Brief no 123 Carbon Competitiveness is Shaped in Firms (in Finnish).

Publication info

Results of research
The carbon competitiveness of Finnish production and its development
Research group
Macroeconomy and public finances
Series
ETLA Raportit - Reports 139
Date
22.05.2023
Keywords
Greenhouse gas emissions (GHG), GHG-intensity, Carbon competitiveness, Productivity, ETS
ISSN
2323-2447, 2323-2455 (Pdf)
JEL
C23, O44, Q54, Q56
Pages
28
Language
English