Lessons from the EU Effort Sharing Decision for Supranational Climate Cooperation: A Firm-Level Analysis

As an example of supranational climate policy coordination for sectors not covered by carbon trading, the European Effort Sharing Decision set national targets for emission reductions for the time period 2013–2020. Member States were free to decide the national policies to implement to achieve these objectives. This is the first quantification of the impact this regulation had on the emissions of firms in the corresponding sectors. We exploit the differences along three variables: a national-level treatment intensity, an exposure index defined at the firm level and a time dimension (before or after the introduction of the policy). We find that, even in countries with no stringent target, emissions from exposed firms tended to decrease more than emissions from non-exposed firms. In addition, each percentage point increase in the stringency of the treatment leads to a 5.7% reduction in emissions for an average exposed firm. This provides interesting insights for other supranational climate agreements.