ECB paper analyses carbon pricing schemes

Rising compliance costs can push firms away from green innovation, paper finds


Carbon pricing mechanisms contribute to lower carbon emissions, research published by the European Central Bank finds.

Maria Cecilia Bustamante and Francesca Zucchi analyse the trade-offs involved in carbon pricing schemes and how firms adapt to them. They conclude the schemes have a positive impact, but can have unanticipated consequences when it becomes costlier for businesses to comply with them.

When that happens, it tilts polluting firms’ investment mix “towards short-term abatement and

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