Data_Effects of Environmental Financial Support Instruments on Firm Productivity

Recent research provides inconsistent evidence of the effectiveness of European Union (EU) renewable energy policies. Therefore, this paper aims at empirically verifying the effectiveness of three major EU renewable energy policies at the micro level. Using pooled OLS, fixed effects, random effects, and system generalized method-of-movements, it analyzes panel data for EU countries over a twenty-year period. The paper first examines in what extent the Emission Trading Scheme (EU ETS) in combination with other renewable support instruments, such as Feed-in Tariff (FIT) and Renewable Portfolio Standard (RPS), contribute to the reduction of emissions by regulated firms. Second, as regulated firms switch to new and more energy-efficient technologies in order to meet the regulation, this paper estimates the impact of the EU ETS, together with the FIT and RPS instruments, on firms’ productivity premia and productivity growth. The main results show that the EU ETS does not have a significant impact on firms’ productivity (except in periods around the implementation phase, i.e. in years <em>t₀</em> and <em>t₁</em>). Firms that are using the FIT support already had higher relative productivity before the EU ETS implementation and continue to maintain the productivity premia over non-EU ETS firms after the ETS implementation, while RPS is shown to boost firms’ productivity after implementation of the EU ETS. The interactions between EU ETS and FIT-RPS measures do not seem to have an additional systematic impact on the productivity of firms affected. <strong>Keywords: </strong>renewable energy, FIT, RPS, EU ETS, technology diffusion, firm productivity