Sectors under scrutiny – Evaluation of indicators to assess the risk of carbon leakage in the UK and Germany
AbstractOne of the central debates surrounding the design of the EU Emissions Trading Scheme is the approach to addressing carbon leakage. Correctly identifying the conomic activities exposed to the risk of carbon leakage represents the first step in mitigating the risk effectively. Several metrics and methods have been proposed to separate sectors which are at risk from those which are not. This study sets out a simple analytical framework and several indicators to measure the relative potential exposure of manufacturing sectors to emissions leakage. These indicators are applied to detailed UK and German data. This illustrates that, when applied to high quality data, simple metrics can be used to identify carbon-intensive-trade-exposed sectors. We find that, of the 159 industrial sub-sectors examined, CO2 cost impacts are focused on a few industrial sub-sectors. The 25 highest ranking sub-sectors collectively account for around 13% of total UK CO2 emissions (from both direct and indirect energy use), 1% of total UK GDP, and 0.5% of total UK employment. For Germany, the equivalent figures are 22% of total CO2 emissions, 2% of GDP and 1% of employment. That the vulnerable sectors account for small shares of emission, value-added and employment does not mean that their potential emissions leakage can be ignored. Rather, the focus on specific sub-sectors provides possibilities for tailored and technical solutions where leakage is a valid concern, thus improving robust economic performance and the credibility of the EU ETS as an instrument for delivering emissions reductions.
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 Grantham Research Institute on Climate Change and the Environment in its series Grantham Research Institute on Climate Change and the Environment Working Papers with number 113.
Date of creation: May 2013
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-22 (All new papers)
- NEP-ENE-2013-11-22 (Energy Economics)
- NEP-ENV-2013-11-22 (Environmental Economics)
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.:
- Grubler, Arnulf & Nakicenovic, Nebojsa & Victor, David G., 1999. "Dynamics of energy technologies and global change," Energy Policy, Elsevier, vol. 27(5), pages 247-280, May.
- Stefan P. Schleicher & Claudia Kettner & Angela Köppl & Gregor Thenius, 2007. "Stringency and Distribution in the EU Emissions Trading Scheme –The 2005 Evidence," Working Papers 2007.22, Fondazione Eni Enrico Mattei.
- Morgenstern, Richard D. & Ho, Mun & Shih, J.-S.Jhih-Shyang & Zhang, Xuehua, 2004.
"The near-term impacts of carbon mitigation policies on manufacturing industries,"
Elsevier, vol. 32(16), pages 1825-1841, November.
- Morgenstern, Richard & Shih, Jhih-Shyang & Ho, Mun & Zhang, Xuehua, 2002. "The Near-Term Impacts of Carbon Mitigation Policies on Manufacturing Industries," Discussion Papers dp-02-06-, Resources For the Future.
- Josh Ederington & Jenny Minier, 2000.
"Is Environmental Policy a Secondary Trade Barrier? An Empirical Analysis,"
Econometric Society World Congress 2000 Contributed Papers
1507, Econometric Society.
- Josh Ederington & Jenny Minier, 2003. "Is environmental policy a secondary trade barrier? An empirical analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 36(1), pages 137-154, February.
- repec:reg:briefs:594 is not listed on IDEAS
- Reyer Gerlagh & Nicole A. Mathys, 2011. "Energy Abundance, Trade and Industry Location," Working Papers 2011.03, Fondazione Eni Enrico Mattei.
- Sijm, J. & Neuhoff, K. & Chen, Y., 2006. "CO2 cost pass through and windfall profits in the power sector," Cambridge Working Papers in Economics 0639, Faculty of Economics, University of Cambridge.
- Reyer Gerlagh & Onno Kuik, 2007. "Carbon Leakage with International Technology Spillovers," Working Papers 2007.33, Fondazione Eni Enrico Mattei.
- Damien Demailly & Philippe Quirion, 2006. "CO2 abatement, competitiveness and leakage in the European cement industry under the EU ETS: Grandfathering vs. output-based allocation," Post-Print halshs-00639327, HAL.
- Oikonomou, Vlasis & Patel, Martin & Worrell, Ernst, 2006. "Climate policy: Bucket or drainer?," Energy Policy, Elsevier, vol. 34(18), pages 3656-3668, December.
- Gallaway, Michael P. & McDaniel, Christine A. & Rivera, Sandra A., 2003. "Short-run and long-run industry-level estimates of U.S. Armington elasticities," The North American Journal of Economics and Finance, Elsevier, vol. 14(1), pages 49-68, March.
- Quirion, Philippe & Monjon, Stéphanie, 2011.
"A border adjustment for the EU ETS: Reconciling WTO rules and capacity to tackle carbon leakage,"
Economics Papers from University Paris Dauphine
123456789/10122, Paris Dauphine University.
- Quirion, Philippe & Monjon, Stéphanie, 2011. "A border adjustment for the EU ETS: Reconciling WTO rules and capacity to tackle carbon leakage," Economics Papers from University Paris Dauphine 123456789/7940, Paris Dauphine University.
- Groenenberg, Heleen & Phylipsen, Dian & Blok, Kornelis, 2001. "Differentiating commitments world wide: global differentiation of GHG emissions reductions based on the Triptych approach--a preliminary assessment," Energy Policy, Elsevier, vol. 29(12), pages 1007-1030, October.
- Palmer, Karen & Butraw, Dallas & Kahn, Danny, 2006. "Simple Rules for Targeting CO2 Allowance Allocations to Compensate Firms," Discussion Papers dp-06-28, Resources For the Future.
- Neuhoff, K. & Keats, K. & Sato, M., 2006. "Allocation, incentives and distortions: the impact of EU ETS emissions allowance allocations to the electricity sector," Cambridge Working Papers in Economics 0642, Faculty of Economics, University of Cambridge.
- Peterson, Everett B. & Schleich, Joachim, 2007. "Economic and environmental effects of border tax adjustments," Working Papers "Sustainability and Innovation" S1/2007, Fraunhofer Institute for Systems and Innovation Research (ISI).
- Clinton R. Shiells & Kenneth A. Reinert, 1993. "Armington Models and Terms-of-Trade Effects: Some Econometric Evidence for North America," Canadian Journal of Economics, Canadian Economics Association, vol. 26(2), pages 299-316, May.
- Grubb, M. & Neuhoff, K., 2006. "Allocation and competitiveness in the EU emissions trading scheme: policy overview," Cambridge Working Papers in Economics 0645, Faculty of Economics, University of Cambridge.
- Onno Kuik & Reyer Gerlagh, 2003. "Trade Liberalization and Carbon Leakage," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 97-120.
- Sergey V. Paltsev, 2001. "The Kyoto Protocol: Regional and Sectoral Contributions to the Carbon Leakage," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 53-80.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (The GRI Administration).
If references are entirely missing, you can add them using this form.