Assessing the Economic Impacts of Environmental Policies
Evidence from a Decade of OECD Research
Over the past decades, governments have gradually adopted more rigorous environmental policies to tackle challenges associated with pressing environmental issues, such as climate change. The ambition of these policies is, however, often tempered by their perceived negative effects on the economy. The empirical evidence in this volume – covering a decade of OECD analysis – shows that environmental policies have had relatively small effects on economic outcomes such as employment, investment, trade and productivity. At the same time, they have been effective at reducing emissions from industry. The policies can however generate winners and losers across firms, industries and regions: while the least productive firms from high-polluting sectors are adversely affected, more productive firms and low-pollution sectors benefit. Environmental policies can be designed and combined with other policies to compensate workers and industries that may lose and to emphasise their positive impacts.
The joint effects of energy prices and carbon taxes in the French manufacturing sector
This chapter focuses on the environmental and economic effects of energy prices and carbon taxes in the French manufacturing sector. Like the previous chapter, it analyses the economic effects of environmental policies alongside environmental ones, focusing here on the effect of energy taxes. These taxes are a main policy instrument to reduce energy consumption and associated carbon emissions. France is one of several OECD countries that have introduced a carbon tax, which translated into higher energy prices. The study uses a unique micro-level dataset and an instrumental variable approach to evaluate the joint effects of changes in energy prices on the French manufacturing sector. The firm-level analysis shows that a 10% increase in energy prices results in a reduction of energy use by 6%, of carbon emissions by 9% and of employment on average by 2%. However, the effect on employment differs according to the size and energy-intensity of the firm. Small and medium-sized enterprises, which stay in business after the energy price increase do not decrease their workforce. The industry-level analysis shows that there is no change in the number of jobs at the sector-level, implying that jobs are not lost but reallocated. The reason for this absence of an effect at the sector level is two opposing factors: large and energy-intensive firms reduce employment in the short run, while smaller energy-efficient firms increase employment in response to output reallocation.
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