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Research article - Peer-reviewed, 2015

Climate policy, environmental performance, and profits

Marklund, Per-Olov; Lundgren, Tommy


In this study we investigate how firm level environmental performance (EP) affects firm level economic performance measured as profit efficiency (PE) in a stochastic profit frontier setting. Analyzing firms in Swedish manufacturing 1990-2004, results show that EP induced by environmental policy is not a determinant of PE, while voluntary or market driven EP seem to have a significant and positive effect on firm PE in most sectors. The evidence generally supports the idea that good EP is also good for business, as long as EP is not brought on by policy measures, in this case a CO2 tax. Thus, the results provide no general support for the Porter hypothesis.


CO2 tax; Environmental performance index; Profit technical efficiency; Stochastic frontier analysis; The Porter hypothesis

Published in

Journal of Productivity Analysis
2015, volume: 44, number: 3, pages: 225-235
Publisher: SPRINGER

Authors' information

Marklund, Per-Olov
Umeå University
Swedish University of Agricultural Sciences, Department of Forest Economics

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