Industry Compensation Under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme

Ralf Martin, Mirabelle Muûls (m.muuls@imperial.ac.uk), Laure de Preux and Ulrich Wagner

No 19097, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: When regulated firms are offered compensation to prevent them from relocating, efficiency requires that payments be distributed across firms so as to equalize marginal relocation probabilities, weighted by the damage caused by relocation. We formalize this fundamental economic logic and apply it to analyzing compensation rules proposed under the EU Emissions Trading Scheme, where emission permits are allocated free of charge to carbon intensive and trade exposed industries. We show that this practice results in substantial overcompensation for given carbon leakage risk. Efficient permit allocation reduces the aggregate risk of job loss by more than half without increasing aggregate compensation.

JEL-codes: F18 H23 H25 Q52 Q54 (search for similar items in EconPapers)
Date: 2013-06
New Economics Papers: this item is included in nep-ene, nep-env, nep-eur and nep-reg
Note: EEE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published as Ralf Martin & Mirabelle Mu?ls & Laure B. de Preux & Ulrich J. Wagner, 2014. "Industry Compensation under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme," American Economic Review, American Economic Association, vol. 104(8), pages 2482-2508, August.

Downloads: (external link)
http://www.nber.org/papers/w19097.pdf (application/pdf)

Related works:
Journal Article: Industry Compensation under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme (2014)
Working Paper: Industry compensation under relocation risk: a firm-level analysis of the EU emissions trading scheme (2014)
Working Paper: Industry Compensation Under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme (2012)
Working Paper: Industry compensation under relocation risk: a firm-level analysis of the EU Emissions Trading Scheme (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:19097

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w19097

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by (wpc@nber.org).