Carbon leakage under incomplete environmental regulation: An industry-level approach
AbstractCarbon leakage is a major concern for policymakers involved with environmental initiatives such as the European Union's emissions trading scheme and similar cap-and-trade proposals in the United States, Australia, and elsewhere.� This paper provides a framework for understanding the drives underlying carbon leakage at the level of an individual sector in which only a subset of firms is covered by such regulation.� It provides simple formulae to estimate leakage rates using information on industry characteristics that is typically available to the analyst.� Illustrative estimates for the steel industry in the EU ETS suggest carbon leakage of 25-30% or (much) higher - unless environmental-efficiency improvements by regulated firms are substantial.
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 University of Oxford, Department of Economics in its series Economics Series Working Papers with number 461.
Date of creation: 01 Nov 2009
Date of revision:
Abatement; Cap-and-trade; Carbon tax; Cost pass-through; Emissions trading; Free allocation; Market structure;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- 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-2009-11-14 (All new papers)
- NEP-ENE-2009-11-14 (Energy Economics)
- NEP-ENV-2009-11-14 (Environmental Economics)
- NEP-REG-2009-11-14 (Regulation)
- NEP-RES-2009-11-14 (Resource 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.:
- Richard A. Lord & W. Ken Farr, 2003. "Collusion and Financial Leverage: An Analysis of the Integrated Mill Steel Industry," Financial Management, Financial Management Association, vol. 32(1), Spring.
- Hoel, Michael, 1991. "Global environmental problems: The effects of unilateral actions taken by one country," Journal of Environmental Economics and Management, Elsevier, vol. 20(1), pages 55-70, January.
- James A. Brander & Anming Zhang, 1990. "Market Conduct in the Airline Industry: An Empirical Investigation," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 567-583, Winter.
- Ghemawat, Pankaj, 1993. "Commitment to a Process Innovation: Nucor, USX, and Thin-Slab Casting," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 2(1), pages 135-61, Spring.
- Ritz, Robert A., 2008. "Strategic incentives for market share," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 586-597, March.
- Martin Pesendorfer, 1998.
"Horizontal Mergers in the Paper Industry,"
NBER Working Papers
6751, National Bureau of Economic Research, Inc.
- Bushnell, James & Wolfram, Catherine, 2008. "Electricity Markets," Staff General Research Papers 31547, Iowa State University, Department of Economics.
- Babiker, Mustafa H., 2005. "Climate change policy, market structure, and carbon leakage," Journal of International Economics, Elsevier, vol. 65(2), pages 421-445, March.
- Cameron Hepburn & John K.-H. Quah & Robert A. Ritz, 2008.
"Emissions Trading with Profit-Neutral Permit Allocations,"
2008-W12, Economics Group, Nuffield College, University of Oxford.
- Hepburn, Cameron J. & Quah, John K.-H. & Ritz, Robert A., 2013. "Emissions trading with profit-neutral permit allocations," Journal of Public Economics, Elsevier, vol. 98(C), pages 85-99.
- Cameron Hepburn & John Quah & Robert A. Ritz, 2008. "Emissions Trading with Profit-Neutral Permit Allocations," Economics Series Working Papers 2008-W12, University of Oxford, Department of Economics.
- Hepburn, C.J. & Quah, J.K.-H. & Ritz, R.A., 2012. "Emissions Trading with Profit-Neutral Permit Allocations," Cambridge Working Papers in Economics 1235, Faculty of Economics, University of Cambridge.
- Chaim Fershtman & Kenneth L Judd, 1984.
"Equilibrium Incentives in Oligopoly,"
642, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Meredith L. Fowlie, 2009. "Incomplete Environmental Regulation, Imperfect Competition, and Emissions Leakage," American Economic Journal: Economic Policy, American Economic Association, vol. 1(2), pages 72-112, August.
- Paul Klemperer & A. Jorge Padilla, 1997. "Do Firms' Product Lines Include Too Many Varieties?," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 472-488, Autumn.
- Hahn, Robert W., 1982.
"Market Power and Transferable Property Rights,"
402, California Institute of Technology, Division of the Humanities and Social Sciences.
- Copeland,B.R. & Taylor,M.S., 2000.
"Free trade and global warming : a trade theory view of the Kyoto protocol,"
4, Wisconsin Madison - Social Systems.
- Copeland, Brian R. & Taylor, M. Scott, 2005. "Free trade and global warming: a trade theory view of the Kyoto protocol," Journal of Environmental Economics and Management, Elsevier, vol. 49(2), pages 205-234, March.
- Brian R. Copeland & M. Scott Taylor, 2000. "Free Trade and Global Warming: A Trade Theory View of the Kyoto Protocol," NBER Working Papers 7657, National Bureau of Economic Research, Inc.
- Sharon Oster, 1982. "The Diffusion of Innovation among Steel Firms: The Basic Oxygen Furnace," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 45-56, Spring.
- Bagnoli, M. & Bergstrom, T., 1989.
"Log-Concave Probability And Its Applications,"
89-23, Michigan - Center for Research on Economic & Social Theory.
- Demailly, Damien & Quirion, Philippe, 2008. "European Emission Trading Scheme and competitiveness: A case study on the iron and steel industry," Energy Economics, Elsevier, vol. 30(4), pages 2009-2027, July.
- Svetlana Batrakova, 2012. "Does industry concentration matter for pollution haven effects?," Grantham Research Institute on Climate Change and the Environment Working Papers 90, Grantham Research Institute on Climate Change and the Environment.
- Dieter Helm & Cameron Hepburn & Giovanni Ruta, 2012.
"Trade, climate change and the political game theory of border carbon adjustments,"
Grantham Research Institute on Climate Change and the Environment Working Papers
80, Grantham Research Institute on Climate Change and the Environment.
- Dieter Helm & Cameron Hepburn & Giovanni Ruta, 2012. "Trade, climate change, and the political game theory of border carbon adjustments," Oxford Review of Economic Policy, Oxford University Press, vol. 28(2), pages 368-394, SUMMER.
- repec:qua:journl:v:9:y:2012:i:2:p:7-28 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Caroline Wise).
If references are entirely missing, you can add them using this form.