This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. 2 │ ECO/WKP(2018)63 THE JOINT IMPACT OF THE EUROPEAN UNION EMISSIONS TRADING SYSTEM ON CARBON EMISSIONS AND ECONOMIC PERFORMANCE Unclassified OECD Working Papers should not be reported as representing the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the author(s). Working Papers describe preliminary results or research in progress by the author(s) and are published to stimulate discussion on a broad range of issues on which the OECD works.

This article reviews the empirical literature combining economic and environmental performance data at the micro-level, i.e. firm-or facility-level. The literature has generally found a positive and statistically significant correlation between economic performance, as measured by profitability indicators or stock market returns, and environmental performance, as measured by emissions of pollutants or adoption of international environmental standards. The main reason for this finding seems to be that firms that reduce their material and energy costs experience both better economic performance and lower emissions. Only a small and recent literature analyses the joint causal impact of environmental regulations on environmental and economic performance. Interestingly, this literature shows that environmental regulations tend to improve environmental performance while not weakening economic performance. However, the evidence so far is limited to a handful of environmental regulations that are not extremely stringent, so the result cannot be easily generalized. More research is needed to assess the joint effects of environmental regulations on environmental and economic performance, to explore the heterogeneity of these effects across sectors, countries and types of policies, and to understand which policy designs allow improving environmental quality while not coming at a cost in terms of economic performance of regulated businesses.

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By Jane Ellis and Daniel Nachtigall (1), Frank Venmans (2) (1) OECD; (2) University of Mons OECD Working Papers should not be reported as representing the official views of the OECD or if its member countries. The opinions expressed and arguments employed are those of the authors.

By Aimée Aguilar Jaber, Brilé Anderson, Daniel Nachtigall and Fatoumata Ngom (1) (1) OECD Environment Directorate. OECD Working Papers should not be reported as representing the official views of the OECD or if its member countries. The opinions expressed and arguments employed are those of the authors.