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Unilateral climate policy and competitiveness: Differential emission pricing from a sectoral, regional and global perspective

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  • Böhringer, Christoph
  • Alexeeva-Talebi, Victoria

Abstract

Unilateral emission reduction commitments raise concerns on international competitiveness and emission leakage that result in preferential regulatory treatment of domestic energy-intensive and trade-exposed industries. Our analysis illustrates the potential pitfalls of climate policy design which narrowly focuses on competitiveness concerns about energy-intensive and trade-exposed branches. The sector-specific gains of preferential regulation in favour of these branches must be traded off against the additional burden imposed on other industries and economy-wide excess costs to meet the unilateral emission reduction target. From the perspective of global cost-effectiveness, however, preferential emission pricing for domestic energy-intensive and trade-exposed sectors can reduce leakage and thereby lower overall cost of cutting global emissions as compared to uniform emission pricing.

Suggested Citation

  • Böhringer, Christoph & Alexeeva-Talebi, Victoria, 2011. "Unilateral climate policy and competitiveness: Differential emission pricing from a sectoral, regional and global perspective," Conference papers 332058, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332058
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