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Developing Supra-European Emissions Trading Schemes: An Efficiency and International Trade Analysis

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  • Alexeeva-Talebi, Victoria
  • Anger, Niels

Abstract

Given the coexistent EU priorities concerning the competitiveness of European industries and international emissions regulation at the company level, this paper assesses the efficiency and competitiveness implications of linking the EU Emissions Trading Scheme (ETS) to emerging trading schemes outside Europe. Currently, countries like Canada, Japan or Australia are contemplating the set up of domestic ETS with the intention of linking up to the European scheme. While a stylized partial-market analysis suggests that the integration of trading systems is always beneficial in efficiency terms, our applied general equilibrium approach shows that the aggregate welfare impacts of linking the EU ETS are rather limited. We further find that the trade-based competitiveness effects of linking the European ETS crucially depend on the linked trading system: Although EU economy-wide competitiveness varies only moderately across linking scenarios, the sectoral decomposition of these aggregate effects shows that European industries are much more sensitive to the linking constellation. Similarly, the incentives for non-EU regions to join the European system display considerable heterogeneity. A stricter allowance allocation within domestic ETS can, however, substantially improve the overall prospects for establishing supra-European emissions trading schemes.

Suggested Citation

  • Alexeeva-Talebi, Victoria & Anger, Niels, 2007. "Developing Supra-European Emissions Trading Schemes: An Efficiency and International Trade Analysis," ZEW Discussion Papers 07-038, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:5697
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    File URL: https://www.econstor.eu/bitstream/10419/24602/1/dp07038.pdf
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    References listed on IDEAS

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    1. Christoph Böhringer & Carsten Vogt, 2003. "Economic and environmental impacts of the Kyoto Protocol," Canadian Journal of Economics, Canadian Economics Association, vol. 36(2), pages 475-496, May.
    2. Christoph Böhringer & Thomas Rutherford, 2002. "Carbon Abatement and International Spillovers," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 22(3), pages 391-417, July.
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    Cited by:

    1. Oberndorfer, Ulrich, 2008. "EU Emission Allowances and the Stock Market: Evidence from the Electricity Industry," ZEW Discussion Papers 08-059, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. Marschinski, Robert & Flachsland, Christian & Jakob, Michael, 2012. "Sectoral linking of carbon markets: A trade-theory analysis," Resource and Energy Economics, Elsevier, vol. 34(4), pages 585-606.
    3. Springmann, Marco, 2012. "A look inwards: Carbon tariffs versus internal improvements in emissions-trading systems," Energy Economics, Elsevier, vol. 34(S2), pages 228-239.
    4. Anger, Niels & Alexeeva-Talebi, Victoria & Löschel, Andreas, 2008. "Alleviating Adverse Implications of EU Climate Policy on Competitiveness: The Case for Border Tax Adjustments or the Clean Development Mechanism?," ZEW Discussion Papers 08-095, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. Dixon, Alistair & Anger, Niels & Holden, Rachel & Livengood, Erich, 2008. "Integration of REDD into the international carbon market: Implications for future commitments and market regulation," ZEW Expertises, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research, number 110512.
    6. Andreas Tuerk & Michael Mehling & Christian Flachsland & Wolfgang Sterk, 2009. "Linking carbon markets: concepts, case studies and pathways," Climate Policy, Taylor & Francis Journals, vol. 9(4), pages 341-357, July.
    7. Oberndorfer, Ulrich, 2009. "EU Emission Allowances and the stock market: Evidence from the electricity industry," Ecological Economics, Elsevier, vol. 68(4), pages 1116-1126, February.
    8. Anger, Niels & Oberndorfer, Ulrich, 2008. "Firm performance and employment in the EU emissions trading scheme: An empirical assessment for Germany," Energy Policy, Elsevier, vol. 36(1), pages 12-22, January.
    9. N. Anger & B. Brouns & J. Onigkeit, 2009. "Linking the EU emissions trading scheme: economic implications of allowance allocation and global carbon constraints," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 14(5), pages 379-398, June.

    More about this item

    Keywords

    Emissions Trading; EU ETS; Linking; Competitiveness; CGE model;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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