Transition Studies Review

, Volume 17, Issue 4, pp 725–736 | Cite as

Impact of CO2 Emissions Reductions on Firms’ Finance in an Emerging Economy: The Case of the Czech Republic

  • Tomáš BrzobohatýEmail author
  • Petr Janský
World Transition Economy Research


This paper investigates the relationship between economic and environmental performance with focus on firms in an emerging economy, the Czech Republic, and their CO2 emission reductions. We discuss whether the hypotheses tested for local pollutants that firms emit and firms’ finances are relevant for CO2 emissions. We test the hypotheses on a sample of Czech firms included in the first phase of European Union Emissions Trading Scheme (EU ETS). We observe that introduction of EU ETS did not encourage significant investments in CO2 emissions reduction. Importantly, the results show that the firms that did invest in CO2 reductions experienced a negative impact on their finance. We argue that this is explained by the drop in the price of allowances on the carbon market in 2006 which resulted in firms receiving less revenue from saved allowances than they had expected.


CO2 emissions reductions Firms Finance European Union Emissions Trading Scheme Czech Republic 

JEL Classification

Q5 G3 P3 



The authors are grateful to Milan Ščasný and Jan Brůha for helpful comments on an earlier draft of this paper. We are also grateful to the Centre for the Environment of the Charles University in Prague for the access to the dataset. The authors acknowledge the support by the Institutional Research Framework 2005–2010, MSM0021620841 of Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague. The usual disclaimer applies.


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Copyright information

© Springer-Verlag 2010

Authors and Affiliations

  1. 1.Faculty of Economics and Business AdministrationGoethe University FrankfurtFrankfurtGermany
  2. 2.Institute of Economic Studies, Faculty of Social SciencesCharles University in PraguePragueCzech Republic

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