Carbon Taxation, Firm Perfor­mance and Labor Demand

This paper investigates the environmental and economic effects of carbon taxation, including the impacts on labor demand for different workers. Using matched employer- employee data from the Swedish registers from 2004 to 2018, I estimate the effects of a reform that increased the stringency of the tax for a subset of firms in the manufacturing sector. In a Difference-in-Differences framework, I find that the reform significantly reduced emissions, primarily through a switch to biofuels. However, it also reduced revenue and employment among emission-intensive firms. The negative employment effects are more pronounced for low-educated workers, suggesting a skill-biased effect of carbon taxation, although high-educated workers are also negatively affected at the most exposed firms.