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Climate Change Policy in European Countries and its effects on industry

  • Stef Proost

    ()

  • Denise Van Regemorter

In this paper we discuss the effects of different climate change policies on industrial activity. We compare the effects of carbon taxes, grandfathered permits, technology standards and voluntary agreements. We survey first the insights from economic theory and from model experiments for the US. Next we use a general equilibrium model, to assess the effect of different climate change policies on industrial activity per sector and per member country in the EU. We pay particular attention to the effects of policies where EU member states exempt their energy-intensive sectors from abatement efforts. The main findings are that, in the EU, the effects on industrial activity and the welfare costs of carbon abatement policies that use tradeable permits or carbon taxes are small when no industrial sectors are exempted. When one member country exempts its energy intensive sector, this will have a small positive impact on its activity level but will generate an extra welfare cost for the EU.

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File URL: http://hdl.handle.net/10.1023/B:MITI.0000038849.35276.3c
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Article provided by Springer in its journal Mitigation and Adaptation Strategies for Global Change.

Volume (Year): 9 (2004)
Issue (Month): 4 (October)
Pages: 453-473

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Handle: RePEc:spr:masfgc:v:9:y:2004:i:4:p:453-473
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  1. A. Lans Bovenberg & Lawrence H. Goulder, 2000. "Neutralizing the Adverse Industry Impacts of CO2 Abatement Policies: What Does it Cost?," NBER Working Papers 7654, National Bureau of Economic Research, Inc.
  2. Jensen, Jesper & Rasmussen, Tobias N., 2000. "Allocation of CO2 Emissions Permits: A General Equilibrium Analysis of Policy Instruments," Journal of Environmental Economics and Management, Elsevier, vol. 40(2), pages 111-136, September.
  3. S. Proost & D. Regemorter, 1995. "The double dividend and the role of inequality aversion and macroeconomic regimes," International Tax and Public Finance, Springer, vol. 2(2), pages 207-219, August.
  4. Goulder, Lawrence H. & Parry, Ian W. H. & Williams III, Roberton C. & Burtraw, Dallas, 1999. "The cost-effectiveness of alternative instruments for environmental protection in a second-best setting," Journal of Public Economics, Elsevier, vol. 72(3), pages 329-360, June.
  5. Parry, Ian W. H. & Williams, Roberton III & Goulder, Lawrence H., 1999. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," Journal of Environmental Economics and Management, Elsevier, vol. 37(1), pages 52-84, January.
  6. Don Fullerton, 2001. "A Framework to Compare Environmental Policies," Southern Economic Journal, Southern Economic Association, vol. 68(2), pages 224-248, October.
  7. Ottar Mæstad, 2001. "Efficient Climate Policy with Internationally Mobile Firms," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 19(3), pages 267-284, July.
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