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Technological Progress and Carbon Price Formation: an Analysis of EU-ETS Plants

Author

Listed:
  • Anouk Faure

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Marc Baudry

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

This study investigates the nature of technological progress in six manufacturing industries covered under the EU-ETS, plus the power sector, and its effect on carbon price formation using marginal abatement cost curves. We adopt a technological frontier framework, which we calibrate to input and output data at the plant level from 2013 to 2017, with a directional distance function approach. Our results reveal that most of the time, technological progress resulted in inflating baseline emissions, despite decreasing the carbon intensity of production. In our sample industries, technological progress therefore leads to increase abatement efforts, raising the equilibrium price of carbon.

Suggested Citation

  • Anouk Faure & Marc Baudry, 2021. "Technological Progress and Carbon Price Formation: an Analysis of EU-ETS Plants," Working Papers hal-04159764, HAL.
    • Handle: RePEc:hal:wpaper:hal-04159764
    Note: View the original document on HAL open archive server: https://hal.science/hal-04159764
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    Cited by:

    1. Aliénor Cameron & Marc Baudry, 2022. "The case for a Carbon Border Adjustment: Where do economists stand?," Policy Papers 2022.01, FAERE - French Association of Environmental and Resource Economists.
    2. Aliénor Cameron & Marc Baudry, 2023. "The case for carbon leakage and border adjustments: where do economists stand?," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 25(3), pages 435-469, July.

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    Keywords

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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • 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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