The Impact of a Carbon Tax on Manufacturing: Evidence from Microdata

72 Pages Posted: 23 Mar 2009 Last revised: 28 Dec 2013

See all articles by Ralf Martin

Ralf Martin

London School of Economics & Political Science (LSE) - Department of Economics; Imperial College Business School

Laure B. de Preux

University of York - Centre For Health Economics (CHE); London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)

Ulrich J. Wagner

University of Mannheim - Department of Economics

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Date Written: December 28, 2013

Abstract

We estimate the impact of a carbon tax on manufacturing plants using panel data from the UK production census. Our identification strategy builds on the comparison of outcomes between plants subject to the full tax and plants that paid only 20% of the tax. Exploiting exogenous variation in eligibility for the tax discount, we find that the carbon tax had a strong negative impact on energy intensity and electricity use. There is no evidence of an adverse impact on employment, revenue or plant exit.

Keywords: carbon tax, climate change levy, energy use, manufacturing, panel data, policy evaluation, UK

JEL Classification: Q41, Q48, Q54, D21, H23

Suggested Citation

Martin, Ralf and de Preux, Laure Bellice and Wagner, Ulrich J., The Impact of a Carbon Tax on Manufacturing: Evidence from Microdata (December 28, 2013). Available at SSRN: https://ssrn.com/abstract=1367149 or http://dx.doi.org/10.2139/ssrn.1367149

Ralf Martin

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Laure Bellice De Preux

University of York - Centre For Health Economics (CHE) ( email )

York YO10 5DD
United Kingdom

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Ulrich J. Wagner (Contact Author)

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany

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