Is Germany Becoming the European Pollution Haven?

Kathrine von Graevenitz, Elisa Rottner and Philipp Richter ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: Relative prices determine competitiveness of different locations. In this paper, we focus on the role of regulatory differences between Germany and other EU countries which affect the shadow price of carbon emissions. We calibrate a Melitz-type model, extended by firms’ emissions and abatement decisions using data on aggregate output, trade and emissions. The parameter estimates are estimated from the German Manufacturing Census. The quantitative model allows us to recover a measure of how regulatory stringency evolved in the EU and Germany in terms of an implicit carbon price paid on emissions. This price reflects energy and carbon prices in addition to command-and-control measures and decreased from 2005 to 2019 in most sectors – both in Germany and other EU countries. The trend is more pronounced in Germany than in the rest of the EU. In counterfactual analyses, we show that this intra-EU difference has substantially increased German industrial emissions. Had the EU experienced the same decrease in implicit carbon prices as Germany, German emissions would have been substantially lower. Germany has increasingly become a pollution haven.

Keywords: Carbon emissions; climate policy; manufacturing; international trade; heterogeneous firms (search for similar items in EconPapers)
JEL-codes: F18 H23 L60 Q56 (search for similar items in EconPapers)
Pages: 60
Date: 2024-02
New Economics Papers: this item is included in nep-eec, nep-ene, nep-env, nep-eur and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Is Germany becoming the European pollution haven? (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2024_503

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