The Competitiveness Impacts of Climate Change Mitigation Policies
AbstractThe pollution haven hypothesis suggests that unilateral domestic emission mitigation policies could cause adverse â€œcompetitivenessâ€ impacts on domestic manufacturers as they lose market share to foreign competitors and relocate production activity â€“ and emissions â€“ 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 firmsâ€™ economic output.
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Bibliographic InfoPaper provided by Harvard Kennedy School of Government in its series Scholarly Articles with number 5688779.
Date of creation: 2011
Date of revision:
Publication status: Published in HKS Faculty Research Working Paper Series
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 E. & Pizer, William A., 2011. "The Competitiveness Impacts of Climate Change Mitigation Policies," Working Paper Series rwp11-047, Harvard University, John F. 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-ALL-2012-05-29 (All new papers)
- NEP-ENE-2012-05-29 (Energy Economics)
- NEP-ENV-2012-05-29 (Environmental Economics)
- NEP-RES-2012-05-29 (Resource Economics)
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