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<p>This paper studies how carbon pricing affects firms’ expectations and pricing decisions. Combining survey data from Italian firms with high-frequency-identified carbon policy shocks, I show that increases in carbon prices raise firms’ inflation expectations across all horizons, from 6 months to 36–60 months ahead. Firms’ expected and realized price growth also rise, alongside larger forecast errors and widening disagreement, consistent with information frictions in expectations formation. The transmission of carbon pricing operates mainly through an indirect channel: most of the response of the 12-month-ahead expectations is driven by the higher energy prices induced by the policy. The pass-through to firms’ expectations display substantial heterogeneity. Firms that view labor costs or competitors’ pricing as central to their price-setting decisions exhibit a more muted pass-through, while those in energy-intensive sectors, such as manufacturing and construction, respond more strongly than firms in services. Providing firms with information on current inflation significantly alters the pass-through of carbon pricing to expectations, underscoring the importance of central bank communication. Overall, the influence of carbon pricing on long-term expectations, the dominance of the indirect energy-price channel, and the presence of information rigidities suggest that monetary policymakers should closely monitor, and potentially respond to, the inflationary consequences of climate policies.</p>

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Carbon Pricing and Firms’ Expectations: Evidence from Italy

  • 期刊论文

  • 发表日期：

    2026年2月4日

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  • Giacomo Mangiante

摘要

This paper studies how carbon pricing affects firms’ expectations and pricing decisions. Combining survey data from Italian firms with high-frequency-identified carbon policy shocks, I show that increases in carbon prices raise firms’ inflation expectations across all horizons, from 6 months to 36–60 months ahead. Firms’ expected and realized price growth also rise, alongside larger forecast errors and widening disagreement, consistent with information frictions in expectations formation. The transmission of carbon pricing operates mainly through an indirect channel: most of the response of the 12-month-ahead expectations is driven by the higher energy prices induced by the policy. The pass-through to firms’ expectations display substantial heterogeneity. Firms that view labor costs or competitors’ pricing as central to their price-setting decisions exhibit a more muted pass-through, while those in energy-intensive sectors, such as manufacturing and construction, respond more strongly than firms in services. Providing firms with information on current inflation significantly alters the pass-through of carbon pricing to expectations, underscoring the importance of central bank communication. Overall, the influence of carbon pricing on long-term expectations, the dominance of the indirect energy-price channel, and the presence of information rigidities suggest that monetary policymakers should closely monitor, and potentially respond to, the inflationary consequences of climate policies.