Subglobal climate agreements and energy-intensive activities: An evaluation of carbon leakage in the copper industry
AbstractSubglobal climate policies induce changes in international competitiveness and favor a relocation of carbon-emitting activities to non-abating regions. In this paper, we evaluate the potential for CO2 abatement and the emissions `leakage' effect in the copper industry, a prominent energy-intensive trade-exposed sector. We formulate a plant-level spatial equilibrium model for copper commodities in which parameters describing the behavioral response of agents are calibrated to econometric estimates of price elasticities. We find producers and consumers to be price inelastic even in the long-run, making the copper industry unresponsive to climate policies. Monte Carlo simulations with our model based on statistical uncertainty on elasticity estimates suggest that around 30% of emissions reductions in industrialized countries would be compensated by an increase of emissions in non-abating countries.
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Bibliographic InfoPaper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 13/174.
Length: 40 pages
Date of creation: Feb 2013
Date of revision:
Carbon leakage; Pollution haven effect; Climate policy; International environmental agreements; International trade; Copper industry.;
Other versions of this item:
- Bruno Lanz & Thomas F. Rutherford & John E. Tilton, 2013. "Subglobal Climate Agreements and Energy-intensive Activities: An Evaluation of Carbon Leakage in the Copper Industry," The World Economy, Wiley Blackwell, vol. 36(3), pages 254-279, 03.
- F18 - International Economics - - Trade - - - Trade and Environment
- F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-02 (All new papers)
- NEP-ENE-2013-03-02 (Energy Economics)
- NEP-ENV-2013-03-02 (Environmental Economics)
- NEP-RES-2013-03-02 (Resource Economics)
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