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Subglobal Climate Agreements and Energy-Intensive Activities: Is there a Carbon Haven for Copper?

Author

Listed:
  • Bruno Lanz
  • Thomas F. Rutherford
  • John E. Tilton

Abstract

Subglobal climate policies induce changes in international competitiveness and favor a relocation of carbon-emitting activities. We argue that many energy-intensive activities are also capital-intensive, so that carbon policies could affect rents rather than abatement or location. Taking copper as an example, we formulate a plant-level spatial equilibrium model of the industry, and we estimate a set of elasticities to calibrate the behavioral parameters of the model. Given 2007 market conditions, Monte Carlo simulations suggest that a $50/tCO2 tax in industrialized countries induces emissions reductions of less than one percent in the copper industry, with a mean emission leakage rate of 25%. Our results conform with empirical findings on the pollution haven effect but challenge projections from computable general equilibrium models.

Suggested Citation

  • Bruno Lanz & Thomas F. Rutherford & John E. Tilton, 2011. "Subglobal Climate Agreements and Energy-Intensive Activities: Is there a Carbon Haven for Copper?," Working Papers 1103, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
    • Handle: RePEc:mee:wpaper:1103
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    Cited by:

    1. Pothen, Frank, 2013. "The metal resources (METRO) model: A dynamic partial equilibrium model for metal markets applied to rare earth elements," ZEW Discussion Papers 13-112, ZEW - Leibniz Centre for European Economic Research.
    2. Bogmans, Christian, 2015. "Can the terms of trade externality outweigh free-riding? The role of vertical linkages," Journal of International Economics, Elsevier, vol. 95(1), pages 115-128.
    3. Katundu Imasiku & Valerie M. Thomas, 2020. "The Mining and Technology Industries as Catalysts for Sustainable Energy Development," Sustainability, MDPI, vol. 12(24), pages 1-13, December.
    4. Tan, Xiujie & Liu, Yu & Cui, Jingbo & Su, Bin, 2018. "Assessment of carbon leakage by channels: An approach combining CGE model and decomposition analysis," Energy Economics, Elsevier, vol. 74(C), pages 535-545.
    5. Pan, Wenqi & Kim, Man-Keun & Ning, Zhuo & Yang, Hongqiang, 2020. "Carbon leakage in energy/forest sectors and climate policy implications using meta-analysis," Forest Policy and Economics, Elsevier, vol. 115(C).
    6. Madison Condon & Ada Ignaciuk, 2013. "Border Carbon Adjustment and International Trade: A Literature Review," OECD Trade and Environment Working Papers 2013/6, OECD Publishing.
    7. Tang, Weiqi & Meng, Bo & Wu, Libo & Liu, Yu, 2016. "Undermined climate policies : a study on the impact of regulatory and financial discrimination across heterogeneous firms in China," IDE Discussion Papers 622, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    8. Dong, Di & An, Haizhong & Huang, Shupei, 2017. "The transfer of embodied carbon in copper international trade: An industry chain perspective," Resources Policy, Elsevier, vol. 52(C), pages 173-180.
    9. Balogh, Jeremiás Máté, 2021. "A kereskedelmi megállapodások szerepe a klímaváltozásban. Szakirodalmi áttekintés [The role of trade agreements in climate change. Systematic literature review]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 540-563.
    10. Pothen, Frank, 2014. "Dynamic market power in an exhaustible resource industry: The case of rare earth elements," ZEW Discussion Papers 14-005, ZEW - Leibniz Centre for European Economic Research.

    More about this item

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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