Firm Competitiveness and the European Union Emissions Trading Scheme
The European Union Emissions Trading Scheme is the first international cap-and-trade program for carbon dioxide and the largest carbon pricing regime in the world. A significant concern over the Emissions Trading Scheme has been the potential impac...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2013/10/18412453/firm-competitiveness-european-union-emissions-trading-scheme http://hdl.handle.net/10986/16847 |
| Summary: | The European Union Emissions Trading
Scheme is the first international cap-and-trade program for
carbon dioxide and the largest carbon pricing regime in the
world. A significant concern over the Emissions Trading
Scheme has been the potential impact on the competitiveness
of industry. Using data on 5,873 firms in ten European
countries during 2001-2009, this paper assesses the impact
on three variables through which the effects on firm
competitiveness may manifest -- unit material costs,
employment and revenue. The analysis focuses on the three
most heavily-emitting industries under the program -- power,
cement, and iron and steel. Empirical results indicate that
the Emissions Trading Scheme has had different impacts
across these three sectors. Although no impacts are found on
any of the three variables in the cement and iron and steel
industries, a positive effect is found on both material
costs and revenue in the power sector. The effect on
material costs likely reflects fuel-switching to reduce
carbon dioxide emissions, while that on revenue may be
partly due to cost pass-through to consumers in a market
that is less exposed to competition outside the Europen
Union. Overall the findings do not substantiate concerns
over carbon leakage, job loss or industry competitiveness
during the study period. |
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