Browsing by Author "Zabihian, Rosa"

The European Union Emission Trading Scheme (EU ETS) was launched in 2005 to meet the actions needed to tackle climate change addressed in the Kyoto Protocol. As an energy and raw material intensive industry, the European pulp and paper industry (PPI) is the 4th largest industrial energy user in the EU. This thesis studies the causal effect of the latest changes in the EU ETS on European PPI’s greenhouse gas emissions and tries to answer whether the EU ETS has been an efficient instrument in decreasing PPI’s emissions. The PPI is determined as a high risk industry for carbon leakage, meaning that there lays a risk if the EU ETS is too expensive, the industry might move its emitting production outside of the EU to countries where environmental regulation is weaker. To prevent this the PPI has gained all of its used emissions allowance units for free. Price of the carbon is still indirectly affecting the industry through energy and electricity prices and decreases to freely allocated emission allowance units has been made since 2013. The method used int his study is difference-in-difference which has been a popular statistical method to investigate the EU ETS’s impact on countries’ manufacturing industries. The core of the method is to determine a control group and a treatment group. The US states’ pulp and paper industry represents the control group and the EU countries represent the treatment group. The control group represents the development of the variable under study without the treatment effect which is then compared to the development of the treatment group’s variable which has been affected by the treatment. This study includes two types of treatments; the EU ETS’s price of carbon in 2010-2019 and cutting the amount of freely allocated emission allowances in 2013. For conducting the study, in addition to industry emissions also productions volumes, price of the energy without carbon price, price of the production and price of the carbon are included as control variables. The results of the study are similar to previous researches’ findings. Total emissions are affected by the production volumes and energy’s price, where production volumes’ effect is the most significant to total emissions. However, the study could not find significant effect of carbon price or cutting the amount of free emission allowances to total emissions which are in line with previous studies’ results. Based on the results it can be argued that the EU ETS has not been an effective instrument to decrease pulp and paper industry’s emissions and further discussions on finding more efficient tools are needed.