{"id":30857,"date":"2018-06-04T10:01:39","date_gmt":"2018-06-04T09:01:39","guid":{"rendered":"https:\/\/www.lse.ac.uk\/granthaminstitute\/?post_type=publication&#038;p=30857"},"modified":"2024-08-19T14:28:12","modified_gmt":"2024-08-19T13:28:12","slug":"trust-compliance-evidence-from-eu-emissions-trading-scheme","status":"publish","type":"publication","link":"https:\/\/www.lse.ac.uk\/granthaminstitute\/publication\/trust-compliance-evidence-from-eu-emissions-trading-scheme\/","title":{"rendered":"Trust and compliance:  evidence from the EU emissions trading scheme"},"content":{"rendered":"<!DOCTYPE html PUBLIC \"-\/\/W3C\/\/DTD HTML 4.0 Transitional\/\/EN\" \"http:\/\/www.w3.org\/TR\/REC-html40\/loose.dtd\">\n<?xml encoding=\"UTF-8\"><p>This paper uses data on the compliance of installations regulated under the EU Emissions Trading Scheme (EU ETS) to investigate how the levels of trust in a country affect the compliance of firms with regulations on climate change.<\/p>\n<p>The paper finds that a high level of trust in the country where an installation operates increases the probability that it will comply with regulations.<\/p>\n<p>Furthermore, looking within countries and comparing subsidiaries of multinational companies reveals that trust prevalent in the country of their central headquarters has a strong positive influence on the compliance of the foreign affiliates. Subsidiaries of multinational companies from high-trust countries are more likely to be in compliance with regulations than subsidiaries of multinationals based in low-trust countries &ndash; even when those subsidiaries are operating in the same country and so are subject to the same regulation enforcement methods.<\/p>\n<p><strong>Key points for decision-makers<\/strong><\/p>\n<ul>\n<li>The paper studies how trust affects compliance behaviour of installations regulated under the EU ETS.<\/li>\n<li>The paper finds that trust in the country where an installation is located has a strong positive influence on the likelihood that the installation will be in compliance with EU ETS regulations.<\/li>\n<li>In addition, looking within countries and comparing multinational subsidiaries operating in the same country shows that trust in the country of their central headquarters has influence on the foreign subsidiaries&rsquo; compliance. This emphasises the role of corporate culture.<\/li>\n<li>For example, in Germany, a subsidiary affiliated to a multinational from Norway (a high-trust country) would be more likely to be in compliance with the EU ETS than a subsidiary of a multinational company from Greece (a low-trust country), even though both operate in the same country and therefore are subject to the same enforcement methods.<\/li>\n<li>The magnitude of the effect is economically meaningful.<\/li>\n<li>A change in ownership from a multinational firm based in the country with the lowest level of trust in the sample (Philippines) to the country with the highest level of trust (Norway) is associated with a 1.5 percentage point decrease in the probability of non-compliance. The average non-compliance rate is 3.2%.<\/li>\n<\/ul>\n<p>ISSN 2515-5717 (Online) &ndash; Grantham Research Institute Working Paper series<\/p>\n<p>ISSN 2515-5709 (Online) &ndash; CCCEP Working Paper series<\/p>\n<p><em>An earlier version of this paper was published under the title <\/em>Trust, compliance and international regulation<em>, in May 2018.<\/em><\/p>\n\n","protected":false},"excerpt":{"rendered":"<!DOCTYPE html PUBLIC \"-\/\/W3C\/\/DTD HTML 4.0 Transitional\/\/EN\" \"http:\/\/www.w3.org\/TR\/REC-html40\/loose.dtd\">\n<?xml encoding=\"UTF-8\"><p>This paper uses data on the compliance of installations regulated under the EU Emissions Trading Scheme to investigate how the levels of trust in a country affect the compliance of firms with regulations on climate change.<\/p>\n\n","protected":false},"author":12,"featured_media":0,"template":"","tags":[166,254,329,98,1128],"publication-type":[435],"topic_area":[4694],"class_list":["post-30857","publication","type-publication","status-publish","hentry","tag-carbon-markets","tag-cooperation","tag-emissions-trading","tag-eu-ets","tag-trust","publication-type-working-papers","topic_area-policy-evaluation"],"acf":{"exclude_from_sync":{"ref_value":"field_560538b0e7350","value":"0","type":false,"post_type":""},"downloads":{"ref_value":"field_52f16cc1a80f2","value":["https:\/\/www.lse.ac.uk\/granthaminstitute\/wp-content\/uploads\/2018\/06\/working-paper-298-Jo-May2019.pdf"],"type":"download","post_type":""},"rss_newsletter":{"ref_value":"field_54f5c2c1544d8","value":"","type":false,"post_type":""},"profile_link":{"ref_value":"field_52f164b5189e9","value":["ara-jo"],"type":"relationship","post_type":"profile"},"spotlight":{"ref_value":"field_52f80896506d3","value":"","type":false,"post_type":""}},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - 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