A spatial competitive analysis: the carbon leakage effect on the cement industry under the European Emissions Trading Scheme

Elisabetta Allevi (), Giorgia Oggioni (), Rossana Riccardi () and Marco Rocco ()
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Elisabetta Allevi: University of Brescia
Giorgia Oggioni: University of Brescia
Rossana Riccardi: University of Brescia
Marco Rocco: Bank of Italy

No 899, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The European Emissions Trading Scheme (ETS) is a cap and trade system to curb CO2 emissions. It has caused both direct costs (CO2 allowances) and indirect costs (higher electricity prices) to energy-intensive industries. Moreover, as there is no global CO2 agreement, the ETS could distort the European economy, prompting energy-intensive industries to relocate production to unregulated countries: the �carbon leakage� effect. This paper investigates the impact of ETS on the cement industry, focusing on Italy, the second European producer, analyzing a Cournot oligopolistic partial equilibrium model with a detailed technological representation of the market. Simulation results show that the European and Italian cement markets are subject to carbon leakage, especially where carbon regulation is more stringent and where plants are located near the seacoast. Further, transportation costs - particularly high in the cement sector - significantly affect the rate of carbon leakage.

Keywords: carbon leakage; cement sector; ETS; generalized Nash game (search for similar items in EconPapers)
JEL-codes: C60 C61 D43 D58 Q50 (search for similar items in EconPapers)
Date: 2013-01
New Economics Papers: this item is included in nep-cmp, nep-ene, nep-env, nep-eur and nep-geo
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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