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

Based on interviews with approximately 800 manufacturing firms in Belgium, France, Germany, Hungary, Poland, and the UK, the study examines how carbon pricing influences corporate behavior. It finds that while many firms implement energy-saving measures and process innovation, product innovation is more strongly driven by the expected stringency of emissions caps. The research highlights a 'trading threshold' where firms with small excess allowances avoid the market and suggests that generous free allocation of allowances may hinder innovation by reducing the signaling effect of tight carbon budgets to senior management.

• A majority of firms (over 60%) that implement greenhouse gas (GHG) reduction measures focus on energy- and GHG emissions-saving measures related to their core processes and machinery.
• The average payback time required for energy-saving investments is nearly four years, though this varies by country; UK firms report the lowest average at 3.5 years, while Polish firms average over five years.
• Approximately 30% of firms in the EU ETS participate passively, viewing the system as a compliance requirement rather than a financial opportunity.
• Firms typically only begin selling excess allowances on the EU ETS market once they possess a surplus of 5,000 to 10,000 allowances, though this 'no trade' category accounts for less than 10% of all excess allowances.
• Firms expect carbon prices to increase significantly in the future, with an average expected price of €40 for the post-2012 trading period.
• Expectations for the stringency of emissions caps increase for Phase III (starting 2013), with the proportion of firms viewing their allocation as non-binding dropping from 40% in Phase II to less than 10% in Phase III.
• Clean process innovation is more common (70% of firms) than clean product innovation (40% of firms), with France leading in process innovation and Germany leading in product innovation.
• 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, particularly product innovation.
• Firms that narrowly miss the thresholds for receiving free allowances under European Commission criteria engage more strongly in product innovation than those that qualify for exemptions.
• The practice of generously allocating free allowances to manufacturing sectors may reduce innovation by failing to signal the importance of GHG emissions to senior management.

APA

Martin, R., Muûls, M., & Wagner, U. (2011). Climate Change, Investment and Carbon Markets and Prices – Evidence from Manager Interviews. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2011/12/Climate-Change-Investment-and-Carbon-Markets-and-Prices.pdf

Chicago

Martin, Ralf, Mirabelle Muûls, and Ulrich Wagner. Climate Change, Investment and Carbon Markets and Prices – Evidence from Manager Interviews. Climate Policy Initiative, 2011. https://www.climatepolicyinitiative.org/wp-content/uploads/2011/12/Climate-Change-Investment-and-Carbon-Markets-and-Prices.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 Policy Initiative |date=January 2011 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2011/12/Climate-Change-Investment-and-Carbon-Markets-and-Prices.pdf |access-date=17 August 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 Policy Initiative}, year = {2011}, month = jan, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2011/12/Climate-Change-Investment-and-Carbon-Markets-and-Prices.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }