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Reaping the Carbon Rent: Abatement and Overallocation Profits in the European Cement industry, Insights from an LMDI Decomposition Analysis

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  • Frédéric Branger

    () (CIRED et AgroParisTech ENGREF)

  • Philippe Quirion

    () (CNRS et CIRED)

Abstract

We analyse variations of carbon emissions in the European cement industry from 1990 to 2011, at the European level(EU 27), and at the national level for six major producers (Germany, France, Spain, United Kingdom, Italy and Poland). We apply a Log-Mean Divisia Index (LMDI) method, crossing data from three databases: the Getting the Numbers Right (GNR) database developed by the Cement Sustainability Initiative, the European Union Transaction Log (EUTL), and the Eurostat International Trade database. Our decomposition method allows disentangling seven channels of emissions change: activity, clinker trade, clinker share, alternative fuels, thermal and electric energy efficiency, and electricity decarbonisation. We find that, apart from a slow trend of emissions reductions coming from technological improvements(first from a decrease in the clinker share, then from an increase in alternative fuels), most of the emissions changes can be attributed to the activity effect. Using counterfactual scenarios, we estimate that the introduction of the EU ETS brought small but positive technological abatement (2.0% ± 1.1% between 2005 and 2011). Moreover, we find that the European cement industry have gained 3.5 billion euros of “overallocation profits”, mostly due to the slowdown of production. Based on these findings, we advocate for output-based allocations, based on a stringent hybrid clinker and cement benchmarking.

Suggested Citation

  • Frédéric Branger & Philippe Quirion, 2014. "Reaping the Carbon Rent: Abatement and Overallocation Profits in the European Cement industry, Insights from an LMDI Decomposition Analysis," Working Papers 2014.10, FAERE - French Association of Environmental and Resource Economists.
  • Handle: RePEc:fae:wpaper:2014.10
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    Cited by:

    1. Frédéric Branger & Misato Sato, 2017. "Solving the clinker dilemma with hybrid output-based allocation," Climatic Change, Springer, vol. 140(3), pages 483-501, February.
    2. Ang, B.W. & Wang, H., 2015. "Index decomposition analysis with multidimensional and multilevel energy data," Energy Economics, Elsevier, vol. 51(C), pages 67-76.
    3. Huang, Yun-Hsun & Chang, Yi-Lin & Fleiter, Tobias, 2016. "A critical analysis of energy efficiency improvement potentials in Taiwan's cement industry," Energy Policy, Elsevier, vol. 96(C), pages 14-26.
    4. Frédéric Branger & Jean-Pierre Ponssard & Oliver Sartor & Misato Sato, 2015. "EU ETS, Free Allocations, and Activity Level Thresholds: The Devil Lies in the Details," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(3), pages 401-437.
    5. Frédéric Branger & Jean-Pierre Ponssard & Oliver Sartor & Misato Sato, 2014. "EU ETS, Free Allocations and Activity Level Thresholds. The devil lies in the details," Working Papers hal-01072736, HAL.
    6. repec:eee:energy:v:165:y:2018:i:pb:p:33-54 is not listed on IDEAS
    7. repec:eee:eneeco:v:70:y:2018:i:c:p:233-243 is not listed on IDEAS
    8. Frédéric Branger & Oskar Lecuyer & Philippe Quirion, 2015. "The European Union Emissions Trading Scheme: should we throw the flagship out with the bathwater?," Post-Print hal-01137875, HAL.
    9. Frédéric Branger & Jean-Pierre Ponssard & Oliver Sartor & Misato Sato, 2015. "EU ETS, Free Allocations, and Activity Level Thresholds: The Devil Lies in the Details," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(3), pages 401-437.
    10. Fabio Zagonari, 2016. "Four Sustainability Paradigms for Environmental Management: A Methodological Analysis and an Empirical Study Based on 30 Italian Industries," Sustainability, MDPI, Open Access Journal, vol. 8(6), pages 1-34, May.
    11. repec:eee:eneeco:v:76:y:2018:i:c:p:101-114 is not listed on IDEAS
    12. repec:eee:streco:v:46:y:2018:i:c:p:136-147 is not listed on IDEAS

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    Keywords

    Cement Industry; LMDI; EU ETS; Abatement; Overallocation; Windfall Profits; Overallocation Profits; Carbon Emissions; Energy Efficiency.;

    JEL classification:

    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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