One of the concerns frequently expressed about climate change policies, is that if we reduce and restrict carbon emissions in the UK, then energy intensive manufacturing will simply shut down and move to other countries.

Some fascinating research, via Ryan Avent, suggests that this may not be the case.

Ralf Martin, Laure de Preux, and Ulrich Wagner published a really interesting paper investigating the effects of the UK’s climate change levy (CCL) and climate change agreements (CCA) on manufacturing firms production of goods, energy use and carbon emissions.

They used data on individual firms from the Office of National Statistics, and found:

“no discernible impact on employment, output or productivity across groups, and we cannot reject the hypothesis that the CCL had no impact on plant exit. Our findings […] make a strong case for the introduction of moderate energy taxes to encourage electricity conservation, to improve energy efficiency and to curb greenhouse gas emissions in the manufacturing sector.”

A neat result: it appears that if you give firms the right incentives, reducing emissions may not be prohibitively expensive or cost jobs or production.

There’s much more in the full paper, including discussions of the assumptions needed for these results to provide causal evidence of the effects of these policies.

Overall their results suggest these climate change policies may have little effect on output and employment, but cause important reductions in emissions and energy use.