Carbon Taxation, Firm Performance, and Labor Demand

Carbon taxation is an important instrument for reducing emissions, yet there is limited evidence on how it affects firms and their employees. This project studies a Swedish reform that gradually phased out carbon-tax refunds for parts of the manufacturing sector between 2011 and 2018. The reform increased effective carbon tax rates more for some firms than for others.

Using detailed Swedish register data that link firms and employees, the project examines how higher carbon taxes affect emissions, revenue, and employment. It pays particular attention to whether the effects differ across workers with different levels of education, age, and gender, and the underlying mechanisms. The project contributes knowledge on how climate policy can reduce emissions while taking account of firms’ competitiveness and labor-market adjustment.