Implications for competitiveness of the Estonian carbon­intensive industry post-2013

Jüri Kleesmaa (), Marko Viiding () and Eduard Latõšov ()
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Jüri Kleesmaa: Tallinn School of Economics and Business Administration (TSEBA) at Tallinn University of Technology
Marko Viiding: University of Tartu
Eduard Latõšov: Tallinn School of Economics and Business Administration (TSEBA) at Tallinn University of Technology

Baltic Journal of Economics, 2011, vol. 11, issue 2, 41-58

Abstract: From 2013 the total quantity of permitted CO2 emissions in the European Union will be decreasingly capped, putting pressure on their unit price. This in turn will influence carbon-intensive companies’ total costs and potentially affect profit margins. This article offers analysis of a small open country’s carbon-intensive firms’ variable cost sensitivity to CO2 prices at €15, €25 and €50 per tonne, using Estonia as a reference. The analysis reveals that firms using heavily carbon-intensive fuels (such as oil shale) could experience variable cost increase up to 100%. Although such fuel is primarily used in Estonia’s electricity generation, the biggest impact would hit the country’s mineral sector where carbon-intensive manufacturing faces on average a 20% variable cost change. Such companies could eventually move their activities outside the EU.

Keywords: CO2 emissions; energy-intensive industry; cost competitiveness; Estonia (search for similar items in EconPapers)
JEL-codes: N70 Q47 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:bic:journl:v:11:y:2011:i:2:p:41-58

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