Unilateral climate policy and competitiveness: The implications of differential emission pricing
Unilateral emission reduction commitments raise concerns on international competitiveness and emission leakage that result in preferential regulatory treatment of domestic energy-intensive and trade-exposed industries. Our analysis illustrates the potential pitfalls of climate policy design which narrowly focuses on competitiveness concerns about energy-intensive and trade-exposed (EITE) branches. The sector-specific gains of preferential regulation in favour of these branches must be traded off against the additional burden imposed on other industries. Beyond burden shifting between industries, differential emission pricing bears the risk for substantial excess cost in emission reduction as policy concedes (too) low carbon prices to EITE industries and thereby foregoes relatively cheap abatement options in these sectors. From the perspective of global cost-effectiveness we find that differential emission pricing of EITE industries hardly reduces emission leakage since the latter is driven through robust international energy market responses to emission constraints. As a consequence the scope for efficiency compared to uniform pricing is very limited. Only towards stringent emission reduction targets will a moderate price differentiation achieve sufficient gains from leakage reduction to offset the losses of diverging marginal abatement cost.
|Date of creation:||Jun 2011|
|Date of revision:||Jun 2011|
|Publication status:||Published in Oldenburg Working Papers V-338-11|
|Contact details of provider:|| Postal: |
Phone: +49 441 798-4107
Fax: +49 441 798-4116
Web page: http://www.vwl.uni-oldenburg.de/
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.:
- Peltonen, Tuomas A. & Skala, Martin & Santos Rivera, Alvaro & Pula, Gabor, 2008. "Imports and profitability in the euro area manufacturing sector: the role of emerging market economies," Working Paper Series 0918, European Central Bank.
- Mahani Zainal Abidin & Wai Heng Loke, 2008. "Revealed Comparative Advantage of Malaysian Exports: The Case for Changing Export Composition," Asian Economic Papers, MIT Press, vol. 7(3), pages 130-147, October.
- 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.
- Xinpeng Xu, 2000. "International Trade and Environmental Regulation: Time Series Evidence and Cross Section Test," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 17(3), pages 233-257, November.
- Felder Stefan & Rutherford Thomas F., 1993. "Unilateral CO2 Reductions and Carbon Leakage: The Consequences of International Trade in Oil and Basic Materials," Journal of Environmental Economics and Management, Elsevier, vol. 25(2), pages 162-176, September.
- Jenkins, Rhys, 1998. "Environmental Regulation and International Competitiveness: A Review of Literature and Some European Evidence," UNU-INTECH Discussion Paper Series 01, United Nations University - INTECH.
- Demailly, Damien & Quirion, Philippe, 2008. "European Emission Trading Scheme and competitiveness: A case study on the iron and steel industry," Energy Economics, Elsevier, vol. 30(4), pages 2009-2027, July.
- Rudiger Ahrend & Donato de Rosa & William Tompson, 2007. "Russian Manufacturing and the Threat of ‘Dutch Disease': A Comparison of Competitiveness Developments in Russian and Ukrainian Industry," OECD Economics Department Working Papers 540, OECD Publishing.
- Roberto Torrini, 2005.
"Profit share and returns on capital stock in Italy: the role of privatisations behind the rise of the 1990s,"
LSE Research Online Documents on Economics
19915, London School of Economics and Political Science, LSE Library.
- Roberto Torrini, 2005. "Profit Share and Returns on Capital Stock in Italy: the Role of Privatisations behind the Rise of the 1990s," CEP Discussion Papers dp0671, Centre for Economic Performance, LSE.
- Antje Hildebrandt & Maria Antoinette Silgoner, 2007. "The Competitiveness Challenge: EU Member States in International Trade," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 4, pages 67–88.
- Guy Meunier & Jean-Pierre Ponssard, 2012.
"A Sectoral Approach Balancing Global Efficiency and Equity,"
Environmental & Resource Economics,
European Association of Environmental and Resource Economists, vol. 53(4), pages 533-552, December.
- Guy MEUNIER & Jean-Pierre Ponssard, 2012. "A sectoral approach balancing global efficiency and equity," Working Papers 174773, Institut National de la Recherche Agronomique, France.
- Isabel Grilo & Gert Koopman, 2006. "Productivity and Microeconomic Reforms: Strengthening EU Competitiveness," Journal of Industry, Competition and Trade, Springer, vol. 6(2), pages 67-84, June.
- Matthew Gorton & Sophia Davidova & Tomas Ratinger, 2000. "The Competitiveness of Agriculture in Bulgaria and the Czech Republic Vis-�-Vis the European Union (CEEC and EU Agricultural Competitiveness)," Comparative Economic Studies, Palgrave Macmillan, vol. 42(1), pages 59-86, April.
- David Dollar & Edward N. Wolff, 1993. "Competitiveness, Convergence, and International Specialization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262041359, June.
- Karl Aiginger, 2006. "Competitiveness: From a Dangerous Obsession to a Welfare Creating Ability with Positive Externalities," Journal of Industry, Competition and Trade, Springer, vol. 6(2), pages 161-177, June.
- Frederick L. Joutz & Stephan Danninger, 2007.
"What Explains Germany's Rebounding Export Market Share?,"
IMF Working Papers
07/24, International Monetary Fund.
- Stephan Danninger & Fred Joutz, 2008. "What Explains Germany's Rebounding Export Market Share?," CESifo Economic Studies, CESifo, vol. 54(4), pages 681-714, December.
- Stephan Danninger & Fred Joutz, 2007. "What Explains Germany’s Rebounding Export Market Share?," CESifo Working Paper Series 1957, CESifo Group Munich.
- Riley, C J, 1980. " The Wage-Price Mechanism and the Long-run Effects of Fiscal and Monetary Policies under Alternative Exchange Rate Regimes," Scandinavian Journal of Economics, Wiley Blackwell, vol. 82(3), pages 332-51.
- Manne, Alan S. & Barreto, Leonardo, 2004. "Learn-by-doing and carbon dioxide abatement," Energy Economics, Elsevier, vol. 26(4), pages 621-633, July.
- Rossi, Vanessa, et al, 1986. "Exchange Rates, Productivity and International Competitiveness," Oxford Review of Economic Policy, Oxford University Press, vol. 2(3), pages 56-73, Autumn.
- Sato, S. & Grubb, M. & Cust, J. & Chan, K. & Korppoo, A. & Ceppi, P., 2007. "Differentiation and dynamics of competitiveness impacts from the EU ETS," Cambridge Working Papers in Economics 0712, Faculty of Economics, University of Cambridge.
- Lih-Jau Wang, 1995. "Environmental capital flight and pollution tax," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 5(3), pages 273-286, April.
- Francis Vitek, 2009. "An Assessment of External Price Competitiveness for Mozambique," IMF Working Papers 09/165, International Monetary Fund.
- Adam B. Jaffe et al., 1995. "Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 132-163, March.
When requesting a correction, please mention this item's handle: RePEc:old:dpaper:338. 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: (Catharina Schramm)
If references are entirely missing, you can add them using this form.