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Carbon leakage under incomplete environmental regulation: An industry-level approach

  • Robert A. Ritz
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    Carbon leakage is a major concern for policymakers involved with environmental initiatives such as the European Union's emissions trading scheme and similar cap-and-trade proposals in the United States, Australia, and elsewhere.� This paper provides a framework for understanding the drives underlying carbon leakage at the level of an individual sector in which only a subset of firms is covered by such regulation.� It provides simple formulae to estimate leakage rates using information on industry characteristics that is typically available to the analyst.� Illustrative estimates for the steel industry in the EU ETS suggest carbon leakage of 25-30% or (much) higher - unless environmental-efficiency improvements by regulated firms are substantial.

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    File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper461.pdf
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    Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 461.

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    Date of creation: 01 Nov 2009
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    Handle: RePEc:oxf:wpaper:461
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    Web page: http://www.economics.ox.ac.uk/
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    14. Ghemawat, Pankaj, 1993. "Commitment to a Process Innovation: Nucor, USX, and Thin-Slab Casting," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 2(1), pages 135-61, Spring.
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