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Swedish Industry and Kyoto An Assessment of the Effects of the European CO2 Emission Permit Trading System

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Author Info
Brännlund, Runar () (Department of Forest Economics, Swedish University of Agricultural Sciences)
Lundgren, Tommy () (Department of Forest Economics, Swedish University of Agricultural Sciences)

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Abstract

We assess the effects on Swedish industry input and output demands of different climate policy scenarios connected to energy policy induced by the Kyoto protocol. A unique data set containing firm level data on outputs and inputs during the years 1991 – 2001 is used to estimate a factor demand model, which is then simulated for different policy scenarios. Sector specific estimation suggests that the proposed quadratic profit function specification exhibit properties and robustness that are consistent with economic

theory; that is, all own-price elasticities are negative and all output elasticities are positive. Furthermore, the elasticities show that the input demands are, in most cases, relatively inelastic. Simulation of the model for 6 different policy scenarios reveal that the effects on Swedish base industry of a EU level

permit trade system is dependent on (i) removal or no removal of current CO2 tax, (ii) the established price of permits, and (iii) what will happen to the electricity price. Our analysis show that changes in electricity price may be more important than the price of permits for some sectors.

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Publisher Info
Paper provided by Swedish University of Agricultural Sciences, Department of Forest Economics in its series Working Paper Series with number 06/01.

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Length: 32 pages
Date of creation: 03 Mar 2006
Date of revision:
Handle: RePEc:hhs:slufec:2006_001

Contact details of provider:
Postal: Department of Forest Economics, Swedish University of Agricultural Sciences, SE 901 83 Umeå, Sweden
Phone: 090-786 62 68
Fax: 090-786 60 73
Email:
Web page: http://www.sekon.slu.se
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Related research
Keywords: CO2-emissions; factor demand; fossil fuels; tradable permit market;

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Find related papers by JEL classification:
Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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References listed on IDEAS
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.:
  1. Lundgren, Tommy & Sjostrom, Magnus, 2001. "A flexible specification of adjustment costs in dynamic factor demand models," Economics Letters, Elsevier, vol. 72(2), pages 145-150, August. [Downloadable!] (restricted)
  2. Charlotte Nilsson & Bengt Kristöm, 2002. "The Costs of Going from Kyoto to Marrakech: Swedish Carbon Policy in a Multi-Regional Model," Working Paper Series 02/327, Swedish University of Agricultural Sciences, Department of Forest Economics.
  3. Brannlund, Runar & Lundgren, Tommy, 2004. "A dynamic analysis of interfuel substitution for Swedish heating plants," Energy Economics, Elsevier, vol. 26(6), pages 961-976, November. [Downloadable!] (restricted)
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  4. Lau, Lawrence J, 1972. "Profit Functions of Technologies with Multiple Inputs and Outputs," The Review of Economics and Statistics, MIT Press, vol. 54(3), pages 281-89, August. [Downloadable!] (restricted)
  5. Martin Hill & Bengt Kristöm, 2002. "Sectoral EU-trading and other Climate Policy Options: Impacts on the Swedish Economy," Working Paper Series 02/328, Swedish University of Agricultural Sciences, Department of Forest Economics.
  6. Lau, Lawrence J., 1976. "A characterization of the normalized restricted profit function," Journal of Economic Theory, Elsevier, vol. 12(1), pages 131-163, February. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Hammar, Henrik & Lundgren, Tommy & Sjöström, Magnus, 2006. "The significance of transport costs in the Swedish forest industry," Working Paper 97, National Institute of Economic Research.
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