A EU study examining the EU Emissions Trading System (ETS) policy found that pricing carbon emissions does not have a negative economic impact for those manufacturing firms regulated under the policy.

A study by Imperial College Business School, in collaboration with the University of Virginia and University of Mannheim, examined whether the ETS, which came into force in 2005, has resulted in a decline in economic activity for those manufacturers that have been regulated under the policy.

The ETS is a ‘cap and trade’ policy that establishes a price for the right to emit CO2. This is achieved by imposing a cap on the total emissions from more than 12,000 power and manufacturing plants in 31 countries across Europe. The cap covers 40% of the EU’s emissions.

The researchers found the manufacturing firms regulated through the ETS have remained financially healthy and competitive, and that a reduction in these firms’ emissions had no negative effect on their profitability.

In particular, the...