Carbon cost pass-through in industrial sectors
Karsten Neuhoff () and
Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
To achieve the ambitions of the 2015 Paris Climate Agreement, the decarbonization of energy-intensive industrial sectors is becoming increasingly important. This paper focuses on the economics of carbon cost pass-through: the change in product prices induced by carbon pricing. We provide a theoretical framework to understand pass-through at the sectoral level and a constructive review of the empirical evidence from the EU ETS and other jurisdictions. Our analysis is structured around three key drivers: international trade, market structure, and free allowance allocation. We provide a synthesis of our key findings for policymakers and identify gaps in the literature for future research.
Keywords: Carbon pricing; cost pass-through; free allocation; full carbon price internalization; international trade; market structure (search for similar items in EconPapers)
JEL-codes: L11 L70 Q54 Q58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-ene, nep-env and nep-reg
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Working Paper: Carbon cost pass-through in industrial sectors (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1988
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