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The compliance of French firms with the EU-ETS : investments and innovative strategies

This research project studies the impact of a cap-and-trade market on firms and the way firms comply with the regulation. Our aim is to estimate the effect of the European emissions trading scheme (EU-ETS) on French installations from the manufacturing industry. We wish to inquire their way of abating CO2 emissions and if they developed innovative strategies to comply with the regulation. The EU-ETS market, launched in 2005, concern the most polluting installations of CO2 in Europe. The covered sectors are electricity, heat, iron, cement, paper, etc. The design of the EU-ETS is facing a trade-off between decisons that would lead to an increase of the CO2 price and potentially would lower the economic activity and decisions that would minimize the burden of the regulation on installations, which would lower their incentives to abate. Hence having a precise knowledge of the way firms comply to the environmental regulation is crucial to design an efficient policy, both for the economic soundness of firms and pollution reduction.