Climate Change, Investment and Carbon Markets and Prices – Evidence from Manager Interviews

The study analyzes how EU ETS carbon pricing and allowance allocations influence the strategic decisions of manufacturing firms. Key findings indicate that while many firms implement basic energy-saving measures, a significant portion of EU ETS participants engage passively with the market. Crucially, the research identifies a causal link between the stringency of emissions caps and 'clean' product innovation, suggesting that generous free allowance allocations may actually hinder innovation by reducing the signaling effect for senior management.

• A majority of firms (over 60%) implement energy- and GHG emissions-saving measures specifically related to their core processes and machinery.
• The average required payback time for energy-saving investments is nearly four years, though this varies by country; UK firms have the lowest average at 3.5 years, while Polish firms average over five years.
• Approximately 30% of firms in the EU ETS are passive participants who view carbon allowances as a compliance requirement rather than a financial asset.
• Many firms do not trade excess allowances unless they possess a significant surplus, typically between 5,000 and 10,000 allowances, though these untraded allowances represent less than 10% of all excess allowances.
• Firms expect carbon prices to rise significantly, with an average expected price of €40 for the post-2012 trading period, and anticipate tighter caps in Phase III (starting 2013).
• Clean innovation varies by type and geography: 70% of firms engage in clean process innovation (led by France) and 40% engage in clean product innovation (led by Germany), with the lowest activity in Hungary and Poland.
• There is a significant positive association between a firm's expectations regarding the future stringency of its emissions cap and its engagement in clean innovation.
• Firms that narrowly miss the thresholds for receiving free allowances engage more strongly in climate-related product innovation than those that qualify for exemptions, suggesting that free allocations can discourage innovation.

APA

Martin, R., Muûls, M., & Wagner, U. (2011). Climate Change, Investment and Carbon Markets and Prices – Evidence from Manager Interviews. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2014/11/cplci-climate-change-investment-and-carbon-markets-and-prices-110201.pdf

Chicago

Martin, Ralf, Mirabelle Muûls, and Ulrich Wagner. Climate Change, Investment and Carbon Markets and Prices – Evidence from Manager Interviews. Climate Strategies, 2011. https://climatestrategies.org/wp-content/uploads/2014/11/cplci-climate-change-investment-and-carbon-markets-and-prices-110201.pdf.

Wikipedia

{{cite report |last1=Martin |first1=Ralf |last2=Muûls |first2=Mirabelle |last3=Wagner |first3=Ulrich |title=Climate Change, Investment and Carbon Markets and Prices – Evidence from Manager Interviews |publisher=Climate Strategies |date=January 2011 |url=https://climatestrategies.org/wp-content/uploads/2014/11/cplci-climate-change-investment-and-carbon-markets-and-prices-110201.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{martin2011climate, author = {Martin, Ralf and Muûls, Mirabelle and Wagner, Ulrich}, title = {{Climate Change, Investment and Carbon Markets and Prices – Evidence from Manager Interviews}}, institution = {Climate Strategies}, year = {2011}, month = jan, url = {https://climatestrategies.org/wp-content/uploads/2014/11/cplci-climate-change-investment-and-carbon-markets-and-prices-110201.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }