Output-based allocation of emissions permits for mitigating the leakage and competitiveness issues for the Japanese economy

Shiro Takeda (), Toshi Arimura, Hanae Tamechika, Carolyn Fischer and Alan Fox ()

Environmental Economics and Policy Studies, 2014, vol. 16, issue 1, 89-110

Abstract: The adoption of domestic emissions trading schemes (ETS) can impose a heavy burden on energy-intensive industries. Particularly, energy-intensive industries competing with foreign competitors could lose their international edge. Although the abatement of CO 2 emissions in industrialized countries entails the reduction of their energy-intensive production, a corresponding increase in the production of energy-intensive goods in countries without CO 2 regulations may lead to carbon “leakage.” This paper examines the effects of various allocation methods of emissions permits in the Japanese ETS on the economy and CO 2 emissions using a multiregional and multisector computable general equilibrium model. Specifically, we apply the Fischer and Fox (Land Econ 83(4):575–599, 2007 ) model to the Japanese economy to address carbon leakage and competitiveness issues. We compare auction schemes, grandfathering schemes, and output-based allocation (OBA) schemes. We further extend the model by examining a combination of auctions and OBA. Though the auction scheme is found to be the best in terms of macroeconomic impacts, the leakage rate is high and the harm to energy-intensive sectors can be significant. OBA causes less leakage and damage to energy-intensive sectors, but the macroeconomic impact is undesirable. Considering all three effects—leakage, competitiveness, and macroeconomics—we find that combinations of auctions and OBA are desirable. Copyright Springer Japan 2014

Keywords: Climate change; Emissions trading; Output-based allocation; International competitiveness; Carbon leakage; C68; D42 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10018-013-0072-8 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Output-Based Allocation of Emissions Permits for Mitigating the Leakage and Competitiveness Issues for the Japanese Economy (2011)
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:spr:envpol:v:16:y:2014:i:1:p:89-110

Ordering information: This journal article can be ordered from
http://www.springer. ... mental/journal/10018

DOI: 10.1007/s10018-013-0072-8

Access Statistics for this article

Environmental Economics and Policy Studies is currently edited by Ken-Ichi Akao

More articles in Environmental Economics and Policy Studies from Springer, Society for Environmental Economics and Policy Studies - SEEPS Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().