The European Central Bank has published a Working Paper Series paper by Christofer Schroeder, which it says does not represent ECB views, examining how carbon pricing under the European Union’s Emissions Trading System affects employment. Using identified shocks to EU-ETS prices, the paper estimates that an exogenous 1 percent increase in EU-ETS prices lowers aggregate employment by about 0.2 percent after roughly 18 months. The estimated effect is more negative for more polluting jobs, while employment in greener jobs also declines, but less sharply. The analysis uses quarterly microdata from the European Labour Force Survey covering 23 EU countries between 2007 and 2019 and classifies jobs by green intensity and pollution intensity. For jobs defined as polluting on the basis of direct emissions intensity, the paper estimates a roughly 1 percent employment decline after one year, about five times the aggregate elasticity, and a peak 0.2 percentage point fall in their employment share. The results also suggest that negative employment effects are stronger where a smaller share of emissions is covered by free allowances and more muted where employment protection legislation is stricter, while changes in average weekly hours worked appear to be a smaller and short-lived adjustment channel.
European Central Bank2026-05-26
European Central Bank working paper finds a 1 percent EU-ETS price rise cuts employment by about 0.2 percent with larger losses in polluting jobs
The European Central Bank published a Working Paper Series study on how carbon pricing under the EU Emissions Trading System affects employment, using quarterly microdata from 23 EU countries between 2007 and 2019. It finds that an exogenous 1 percent increase in EU-ETS prices reduces aggregate employment by about 0.2 percent after roughly 18 months, with a much larger impact on more polluting jobs, and that effects are stronger where fewer emissions are covered by free allowances and weaker where employment protection legislation is stricter.