The Competitiveness Impacts of Climate Change Mitigation Policies
AbstractThe pollution haven hypothesis suggests that unilateral domestic emission mitigation policies could cause adverse "competitiveness" impacts on domestic manufacturers as they lose market share to foreign competitors and relocate production activity--and emissions--to unregulated economies. We construct a precise definition of competitiveness impacts appropriate for climate change regulation that can be estimated exclusively with domestic production and net import data. We use this definition and a 20+ year panel of 400+ U.S. manufacturing industries to estimate the effects of energy prices, which is in turn used to simulate the impacts of carbon pricing policy. We find that a U.S.-only $15 per ton CO2 price will cause competitiveness effects on the order of a 1.0 to 1.3 percent decline in production among the most energy-intensive manufacturing industries. This amounts to roughly one-third of the total impact of a carbon pricing policy on these firms' economic output.
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Bibliographic InfoPaper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp11-047.
Date of creation: Dec 2011
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Other versions of this item:
- Joseph E. Aldy & William A. Pizer, 2011. "The Competitiveness Impacts of Climate Change Mitigation Policies," NBER Working Papers 17705, National Bureau of Economic Research, Inc.
- Aldy, Joseph Edgar & Pizer, William, 2011. "The Competitiveness Impacts of Climate Change Mitigation Policies," Scholarly Articles 5688779, Harvard Kennedy School of Government.
- F18 - International Economics - - Trade - - - Trade and Environment
- Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
This paper has been announced in the following NEP Reports:
- NEP-AGR-2012-02-01 (Agricultural Economics)
- NEP-ALL-2012-02-01 (All new papers)
- NEP-ENE-2012-02-01 (Energy Economics)
- NEP-ENV-2012-02-01 (Environmental Economics)
- NEP-REG-2012-02-01 (Regulation)
- NEP-RES-2012-02-01 (Resource Economics)
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