Emissions Trading under a Relative Cap: An alternative for conventional emissions trading that would prevent carbon leakage and protect exposed sectors of industry?

Onno Kuik and Reyer Gerlagh

No 331375, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: Given potentially negative impacts of Kyoto-type climate change policies on the competitiveness of Dutch exposed sectors and the possibility of international carbon leakage, is there a possibility to do better? This paper examines the option of a relative, or rate-based emissions ceiling for exposed sectors in the Netherlands. An analysis of Performance Standard Rate (PSR) emissions trading for the Netherlands was carried out with the GTAP-E model that was extended to simulate PSR trading and variable returns to scale in production. The model simulations suggest that PSR emissions trading would reduce carbon leakage and loss of competitiveness of exposed sectors, but that it would not improve welfare. This result is sensitive to assumptions on trade elasticities and returns to scale.

Keywords: Environmental Economics and Policy; International Relations/Trade (search for similar items in EconPapers)
Pages: 42
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:331375

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