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CEP discussion paper
The Impacts of the Climate Change Levy on business: Evidence from Microdata
Ralf Martin, Ulrich J. Wagner and Laure B. de Preux March 2009
Paper No' CEPDP0917:
Full Paper (pdf)

JEL Classification: Q41; Q48; Q54; D21

Tags: climate policy; carbon tax; united kingdom; manufacturing; impact assessment

We estimate the impacts of the Climate Change Levy (CCL) on manufacturing plants using panel data from the UK production census. Our identification strategy builds on the comparison of outcomes between plants subject to the CCL and plants that were granted an 80% discount on the levy after joining a Climate Change Agreement (CCA). Exploiting exogenous variation in eligibility for CCA participation, we find that the CCL had a strong negative impact on energy intensity and electricity use. We cannot reject the hypothesis that the tax had no detrimental effects on economic performance and on plant exit.