Estimating the Effect of an EU-ETS Type Scheme in Australia Using a Synthetic Treatment Approach

Anderson, Heather M.; Gao, Jiti; Turnip, Guido; Vahid, Farshid; Wei, Wei

doi:10.2139/ssrn.4167367

Cited by 1 publication

(2 citation statements)

References 32 publications

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“…However, SCM may fail under various circumstances, especially if the period of pre-treatment observations is not long enough 39 . The same method was also used by 40 , where the scholars concentrated their analysis on estimating the effects on emissions for Australia, if Australia had adopted the EU ETS scheme. They found a statistically significant reduction in the CO 2 emissions per capita.…”

Section: Empirical Reviewmentioning

confidence: 99%

“…Although some non-EU countries also took specific measures to reduce CO 2 emissions, the impact of these measures was relatively negligible compared to the EU ETS policy until 2016 54 . For instance, Australia adopted a policy similar to the EU ETS one only some years later (in 2011), and ratified the Paris agreement only in November 2016 40 .…”

Section: Description Of the Data Setmentioning

confidence: 99%

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The Impact of the European Union Emissions Trading System on Carbon Dioxide Emissions: A Matrix Completion Analysis

Biancalani,

Gnecco,

Metulini

et al. 2024

Preprint

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Despite the negative externalities on the environment and human health, today’s economies still produce excessive carbon dioxide emissions. As a result, governments are trying to shift production and consumption to more sustainable models that reduce the impact of carbon dioxide emissions. The European Union, in particular, has implemented an innovative policy to reduce carbon dioxide emissions by creating a market for emission rights, the emissions trading system. The objective of this paper is to perform a counterfactual analysis to measure the impact of the emissions trading system on the reduction of carbon dioxide emissions. For this purpose, a recently-developed statistical machine learning method called matrix completion with fixed effects estimation is used and compared to traditional econometric techniques. We apply matrix completion with fixed effects estimation to the prediction of missing counterfactual entries of a carbon dioxide emissions matrix whose elements (indexed row-wise by country and column-wise by year) represent emissions without the emissions trading system for country-year pairs. The results obtained, confirmed by robust diagnostic tests, show a significant effect of the emissions trading system on the reduction of carbon dioxide emissions: the majority of European Union countries included in our analysis reduced their total carbon dioxide emissions by about 20% during the emissions trading system treatment period 2005–2016, compared to the total carbon dioxide emissions that would have been achieved in the absence of the emissions trading system policy. Finally, several managerial/practical implications of the study are discussed, together with its possible extensions.

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Section: Empirical Reviewmentioning

confidence: 99%

Section: Description Of the Data Setmentioning

confidence: 99%