Carbon pricing and aggregate macroeconomic performance in the Eurozone: a contribution to the climate policy debate using the EU ETS and Macroeconomic Performance Index

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dc.authorid0000-0002-3710-6146en_US
dc.contributor.authorOlasehinde-Williams, Godwin
dc.date.accessioned2024-04-19T13:15:41Z
dc.date.available2024-04-19T13:15:41Z
dc.date.issued2024en_US
dc.departmentFakülteler, İşletme Fakültesi, Yönetim Bilişim Sistemleri (İngilizce) Bölümüen_US
dc.description.abstractThis article contributes to the carbon pricing debate by providing new evidence on the aggregate macroeconomic effect of the European Union Emissions Trading Scheme (EU ETS) in the Eurozone. To this end, a novel macroeconomic performance index is created to capture the overall economic performance of the Eurozone countries. The index is a weighted aggregation of key macroeconomic variables—GDP growth rate, inflation rate, employment rate, exchange rate, and long-term inflation rate—for the 19 member countries of the group. The effect of the EU ETS on this macroeconomic performance index is then empirically examined while controlling for the effects of physical capital accumulation, human capital accumulation and regulatory quality. A panel framework covering the period 2005–2022 is set up to achieve this objective and the relationship is examined using panel method of moments quantile regression with fixed effects, as well as fixed and random effects regressions of Driscoll and Kraay. A number of important revelations are made. Firstly, the behavior of the macroeconomic performance index constructed clearly reflects the economic reality of the Eurozone, with downward spikes visible in periods corresponding with the economic crisis of 2007–2009, the Eurozone debt crisis of 2010/2011, the aftermath of the financial crisis of 2016, and periods around the outbreak of the Coronavirus (COVID-19) pandemic. Hence, a case is made for the use of the macroeconomic performance index as a superior aggregate measure of the overall economic performance in empirical research. Secondly, a statistically significant negative effect of the EU ETS on aggregate macroeconomic performance in the Eurozone is confirmed. This shows that there are significant economic costs associated with the use of carbon pricing as a means of lowering pollution. Thirdly, the findings further show that the negative impact gradually decreases (in absolute values) from lower to higher quantiles. Overall, higher carbon prices cause greater economic disruption when macroeconomic performance is relatively poor but have less damaging effect when aggregate economic performance is relatively strong. Policy recommendations based on the study findings are also provided.en_US
dc.identifier.doi10.1007/s11356-024-32676-5en_US
dc.identifier.pmid38538992en_US
dc.identifier.scopus2-s2.0-85188783318en_US
dc.identifier.scopusqualityN/Aen_US
dc.identifier.urihttps://hdl.handle.net/11467/7240
dc.identifier.urihttps://doi.org/10.1007/s11356-024-32676-5
dc.indekslendigikaynakScopusen_US
dc.indekslendigikaynakPubMeden_US
dc.language.isoenen_US
dc.publisherSpringeren_US
dc.relation.ispartofEnvironmental Science and Pollution Researchen_US
dc.relation.publicationcategoryMakale - Uluslararası Hakemli Dergi - Kurum Öğretim Elemanıen_US
dc.rightsinfo:eu-repo/semantics/embargoedAccessen_US
dc.subjectCarbon pricing; EU ETS; Eurozone; Macroeconomics; Panel data analysisen_US
dc.titleCarbon pricing and aggregate macroeconomic performance in the Eurozone: a contribution to the climate policy debate using the EU ETS and Macroeconomic Performance Indexen_US
dc.typeArticleen_US

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