Does industry concentration matter for pollution haven effects?

This paper focuses on the role of firm�s market power and industry concentration in a still debated issue of pollution haven effects or carbon �leakage� representedas increased trade fows in the most polluting sectors from the developing worldspurred by regulations in developed countries. A firm in a relatively competitiveindustry with less market power has no option to transfer costs of environmentalregulations to consumers and may be more likely to resort to �importing pollution�from places with lax environmental standards that insure cheaper inputs as a resultof such regulations at home. This paper finds that a degree of industry�s concentration has an effect on firms� margins of products that were affected by the EU ETSpolicy in 2005 and that are imported from the developing world. Firms in from the developing world post 2005 more than firms in a less competitive setting.