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Journal Article / Climate

Outward Foreign Direct Investments Patterns of Italian Firms in the EU ETS

Author(s): BORGHESI Simone, FRANCO Chiara, MARIN Giovanni

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ABSTRACT

We consider the role played by the EU Emission Trading System (EU ETS) as a possible driver of outward Foreign Direct Investments (FDI) for Italian manufacturing firms. Using a panel dataset of about 22,000 firms covering the first two phases of the EU ETS and the pre‐EU ETS period, we measure the patterns of FDI towards countries not covered by EU ETS. Results show that the EU ETS had a weak effect on the number of new subsidiaries abroad (extensive margin), while it had a larger impact on production taking place in foreign subsidiaries (intensive margin), especially in trade‐intensive sectors.