A spatial competitive analysis: the carbon leakage effect on the cement industry under the European Emissions Trading Scheme
AbstractThe European Emissions Trading Scheme (ETS) is a cap and trade system to curb CO2 emissions. It has caused both direct costs (CO2 allowances) and indirect costs (higher electricity prices) to energy-intensive industries. Moreover, as there is no global CO2 agreement, the ETS could distort the European economy, prompting energy-intensive industries to relocate production to unregulated countries: the “carbon leakage” effect. This paper investigates the impact of ETS on the cement industry, focusing on Italy, the second European producer, analyzing a Cournot oligopolistic partial equilibrium model with a detailed technological representation of the market. Simulation results show that the European and Italian cement markets are subject to carbon leakage, especially where carbon regulation is more stringent and where plants are located near the seacoast. Further, transportation costs - particularly high in the cement sector - significantly affect the rate of carbon leakage.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 899.
Date of creation: Jan 2013
Date of revision:
carbon leakage; cement sector; ETS; generalized Nash game;
Find related papers by JEL classification:
- C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-02-08 (All new papers)
- NEP-CMP-2013-02-08 (Computational Economics)
- NEP-ENE-2013-02-08 (Energy Economics)
- NEP-ENV-2013-02-08 (Environmental Economics)
- NEP-EUR-2013-02-08 (Microeconomic European Issues)
- NEP-GEO-2013-02-08 (Economic Geography)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pankaj Ghemawat & Catherine Thomas, 2008. "Strategic Interaction Across Countries and Multinational Agglomeration: An Application to the Cement Industry," Management Science, INFORMS, vol. 54(12), pages 1980-1996, December.
- Guy Meunier & Jean-Pierre Ponssard, 2012. "A Sectoral Approach Balancing Global Efficiency and Equity," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 53(4), pages 533-552, December.
- Guy Meunier & Jean-Pierre Ponssard, 2014.
"Capacity Decisions with Demand Fluctuations and Carbon Leakage,"
CESifo Working Paper Series
4627, CESifo Group Munich.
- Guy Meunier & Jean-Pierre Ponssard, 2013. "Capacity decisions with demand fluctuations and carbon leakage," Working Papers hal-00347650, HAL.
- Szabo, Laszlo & Hidalgo, Ignacio & Ciscar, Juan Carlos & Soria, Antonio, 2006. "CO2 emission trading within the European Union and Annex B countries: the cement industry case," Energy Policy, Elsevier, vol. 34(1), pages 72-87, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.