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Carbon Leakage and Competitiveness of Cement and Steel Industries Under the EU ETS: Much Ado About Nothing

Author

Listed:
  • Frédéric Branger

    (CIRED - centre international de recherche sur l'environnement et le développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

  • P. Quirion

    (CIRED - centre international de recherche sur l'environnement et le développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

  • Julien Chevallier

Abstract

In a world of uneven climate policies, concerns about carbon leakage and competitiveness for heavy industries are the main arguments against the implementation of ambitious climate policies. In this paper we investigate a potential competitiveness-driven operational carbon leakage due to the European Union Emissions Trading scheme (EU ETS). We focus on two energy-intensive sectors, cement and steel, and phases I and II of the EU ETS. From a simple analytical model, we derive an equation linking net imports of cement and steel to local and foreign demand along with carbon price. We then econometrically estimate this relation both with ARIMA regression and Prais-Winsten estimation, finding that local and foreign demand are robust drivers of trade flows. We find no significant effect of the carbon price on net imports of steel and cement. We conclude that there is no evidence of carbon leakage in these sectors, at least in the short run.

Suggested Citation

  • Frédéric Branger & P. Quirion & Julien Chevallier, 2016. "Carbon Leakage and Competitiveness of Cement and Steel Industries Under the EU ETS: Much Ado About Nothing," Post-Print hal-01425095, HAL.
    • Handle: RePEc:hal:journl:hal-01425095
    DOI: 10.5547/01956574.37.3.fbra
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