Sectors under scrutiny – Evaluation of indicators to assess the risk of carbon leakage in the UK and Germany
One of the central debates surrounding the design of the EU Emissions Trading Scheme is the approach to addressing carbon leakage. Correctly identifying the conomic activities exposed to the risk of carbon leakage represents the first step in mitigating the risk effectively. Several metrics and methods have been proposed to separate sectors which are at risk from those which are not. This study sets out a simple analytical framework and several indicators to measure the relative potential exposure of manufacturing sectors to emissions leakage. These indicators are applied to detailed UK and German data. This illustrates that, when applied to high quality data, simple metrics can be used to identify carbon-intensive-trade-exposed sectors. We find that, of the 159 industrial sub-sectors examined, CO2 cost impacts are focused on a few industrial sub-sectors. The 25 highest ranking sub-sectors collectively account for around 13% of total UK CO2 emissions (from both direct and indirect energy use), 1% of total UK GDP, and 0.5% of total UK employment. For Germany, the equivalent figures are 22% of total CO2 emissions, 2% of GDP and 1% of employment. That the vulnerable sectors account for small shares of emission, value-added and employment does not mean that their potential emissions leakage can be ignored. Rather, the focus on specific sub-sectors provides possibilities for tailored and technical solutions where leakage is a valid concern, thus improving robust economic performance and the credibility of the EU ETS as an instrument for delivering emissions reductions.
|Date of creation:||May 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +44 (020) 7405 7686
Web page: http://www.lse.ac.uk/grantham.
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sijm, J. & Neuhoff, K. & Chen, Y., 2006.
"CO2 cost pass through and windfall profits in the power sector,"
Cambridge Working Papers in Economics
0639, Faculty of Economics, University of Cambridge.
- Jos Sijm & Karsten Neuhoff & Yihsu Chen, 2006. "CO 2 cost pass-through and windfall profits in the power sector," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 49-72, January.
- Clinton R. Shiells & Kenneth A. Reinert, 1993. "Armington Models and Terms-of-Trade Effects: Some Econometric Evidence for North America," Canadian Journal of Economics, Canadian Economics Association, vol. 26(2), pages 299-316, May.
- Palmer, Karen & Butraw, Dallas & Kahn, Danny, 2006. "Simple Rules for Targeting CO2 Allowance Allocations to Compensate Firms," Discussion Papers dp-06-28, Resources For the Future.
- Wietze Lise & Jos Sijm & Benjamin Hobbs, 2010. "The Impact of the EU ETS on Prices, Profits and Emissions in the Power Sector: Simulation Results with the COMPETES EU20 Model," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 47(1), pages 23-44, September.
- Sergey V. Paltsev, 2001. "The Kyoto Protocol: Regional and Sectoral Contributions to the Carbon Leakage," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 53-80.
- Neuhoff, K. & Keats, K. & Sato, M., 2006.
"Allocation, incentives and distortions: the impact of EU ETS emissions allowance allocations to the electricity sector,"
Cambridge Working Papers in Economics
0642, Faculty of Economics, University of Cambridge.
- Karsten Neuhoff & Kim Keats Martinez & Misato Sato, 2006. "Allocation, incentives and distortions: the impact of EU ETS emissions allowance allocations to the electricity sector," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 73-91, January.
- Reyer Gerlagh & Onno Kuik, 2007. "Carbon Leakage with International Technology Spillovers," Working Papers 2007.33, Fondazione Eni Enrico Mattei.
- Damien Demailly & Philippe Quirion, 2006. "CO2 abatement, competitiveness and leakage in the European cement industry under the EU ETS: Grandfathering vs. output-based allocation," Post-Print halshs-00639327, HAL.
- Josh Ederington & Jenny Minier, 2003.
"Is environmental policy a secondary trade barrier? An empirical analysis,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 36(1), pages 137-154, February.
- Josh Ederington & Jenny Minier, 2000. "Is Environmental Policy a Secondary Trade Barrier? An Empirical Analysis," Econometric Society World Congress 2000 Contributed Papers 1507, Econometric Society.
- repec:reg:briefs:594 is not listed on IDEAS
- Knut Einar Rosendahl, 2002.
"Cost-effective environmental policy: Implications of induced technological change,"
314, Research Department of Statistics Norway.
- Rosendahl, Knut Einar, 2004. "Cost-effective environmental policy: implications of induced technological change," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 1099-1121, November.
- Stéphanie Monjon & Philippe Quirion, 2011.
"A border adjustment for the EU ETS: reconciling WTO rules and capacity to tackle carbon leakage,"
Taylor & Francis Journals, vol. 11(5), pages 1212-1225, September.
- Quirion, Philippe & Monjon, Stéphanie, 2011. "A border adjustment for the EU ETS: Reconciling WTO rules and capacity to tackle carbon leakage," Economics Papers from University Paris Dauphine 123456789/10122, Paris Dauphine University.
- Quirion, Philippe & Monjon, Stéphanie, 2011. "A border adjustment for the EU ETS: Reconciling WTO rules and capacity to tackle carbon leakage," Economics Papers from University Paris Dauphine 123456789/7940, Paris Dauphine University.
- Hidalgo, Ignacio & Szabo, Laszlo & Carlos Ciscar, Juan & Soria, Antonio, 2005. "Technological prospects and CO2 emission trading analyses in the iron and steel industry: A global model," Energy, Elsevier, vol. 30(5), pages 583-610.
- Stefan P. Schleicher & Claudia Kettner & Angela Köppl & Gregor Thenius, 2007. "Stringency and Distribution in the EU Emissions Trading Scheme –The 2005 Evidence," Working Papers 2007.22, Fondazione Eni Enrico Mattei.
- Reyer Gerlagh & Nicole A. Mathys, 2011. "Energy Abundance, Trade and Industry Location," Working Papers 2011.03, Fondazione Eni Enrico Mattei.
- Onno Kuik & Reyer Gerlagh, 2003. "Trade Liberalization and Carbon Leakage," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 97-120.
- Gallaway, Michael P. & McDaniel, Christine A. & Rivera, Sandra A., 2003. "Short-run and long-run industry-level estimates of U.S. Armington elasticities," The North American Journal of Economics and Finance, Elsevier, vol. 14(1), pages 49-68, March.
- Morgenstern, Richard D. & Ho, Mun & Shih, J.-S.Jhih-Shyang & Zhang, Xuehua, 2004.
"The near-term impacts of carbon mitigation policies on manufacturing industries,"
Elsevier, vol. 32(16), pages 1825-1841, November.
- Morgenstern, Richard & Shih, Jhih-Shyang & Ho, Mun & Zhang, Xuehua, 2002. "The Near-Term Impacts of Carbon Mitigation Policies on Manufacturing Industries," Discussion Papers dp-02-06-, Resources For the Future.
- Grubb, M. & Neuhoff, K., 2006.
"Allocation and competitiveness in the EU emissions trading scheme: policy overview,"
Cambridge Working Papers in Economics
0645, Faculty of Economics, University of Cambridge.
- Michael Grubb & Karsten Neuhoff, 2006. "Allocation and competitiveness in the EU emissions trading scheme: policy overview," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 7-30, January.
- Peterson, Everett B. & Schleich, Joachim, 2007. "Economic and environmental effects of border tax adjustments," Working Papers "Sustainability and Innovation" S1/2007, Fraunhofer Institute for Systems and Innovation Research (ISI).
- Grubler, Arnulf & Nakicenovic, Nebojsa & Victor, David G., 1999. "Dynamics of energy technologies and global change," Energy Policy, Elsevier, vol. 27(5), pages 247-280, May.
- Oikonomou, Vlasis & Patel, Martin & Worrell, Ernst, 2006. "Climate policy: Bucket or drainer?," Energy Policy, Elsevier, vol. 34(18), pages 3656-3668, December.
- Groenenberg, Heleen & Phylipsen, Dian & Blok, Kornelis, 2001. "Differentiating commitments world wide: global differentiation of GHG emissions reductions based on the Triptych approach--a preliminary assessment," Energy Policy, Elsevier, vol. 29(12), pages 1007-1030, October.
When requesting a correction, please mention this item's handle: RePEc:lsg:lsgwps:wp113. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (The GRI Administration)
If references are entirely missing, you can add them using this form.