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Implications for competitiveness of the Estonian carbon­intensive industry post-2013

Author

Listed:
  • Jüri Kleesmaa

    () (Tallinn School of Economics and Business Administration (TSEBA) at Tallinn University of Technology)

  • Marko Viiding

    () (University of Tartu)

  • Eduard Latõšov

    () (Tallinn School of Economics and Business Administration (TSEBA) at Tallinn University of Technology)

Abstract

From 2013 the total quantity of permitted CO2 emissions in the European Union will be decreasingly capped, putting pressure on their unit price. This in turn will influence carbon-intensive companies’ total costs and potentially affect profit margins. This article offers analysis of a small open country’s carbon-intensive firms’ variable cost sensitivity to CO2 prices at €15, €25 and €50 per tonne, using Estonia as a reference. The analysis reveals that firms using heavily carbon-intensive fuels (such as oil shale) could experience variable cost increase up to 100%. Although such fuel is primarily used in Estonia’s electricity generation, the biggest impact would hit the country’s mineral sector where carbon-intensive manufacturing faces on average a 20% variable cost change. Such companies could eventually move their activities outside the EU.

Suggested Citation

  • Jüri Kleesmaa & Marko Viiding & Eduard Latõšov, 2011. "Implications for competitiveness of the Estonian carbon­intensive industry post-2013," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 11(2), pages 41-58, December.
  • Handle: RePEc:bic:journl:v:11:y:2011:i:2:p:41-58
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    References listed on IDEAS

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    1. Commins, Nicola & Lyons, Seán & Schiffbauer, Marc & Tol, Richard S. J., 2009. "Climate Policy and Corporate Behaviour," Papers WP329, Economic and Social Research Institute (ESRI).
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    Keywords

    CO2 emissions; energy-intensive industry; cost competitiveness; Estonia;

    JEL classification:

    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • N70 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - General, International, or Comparative

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