Carbon Leakage and Capacity-Based Allocations. Is the EU right?

Guy Meunier, Jean-Pierre Ponssard and Philippe Quirion

No 4029, CESifo Working Paper Series from CESifo

Abstract: Two main approaches have been implemented in regional CO2 markets to address competitiveness and carbon leakage: output based allocation (Australia, California, New Zealand) and capacity based allocation (EU). This paper characterizes the best policy, given that auctioning with border adjustment is excluded. A simple model is used in which the regional demand is subject to business cycles, and the import pressure depends on the demand level and capacity constraints. A combination of output and capacity based allocation is proved to be the optimal second best policy. The EU scheme for 2013-2020 is discussed, using cement as a case study.

Keywords: cap and trade; output based allocation; subsidization of capacity; climate policy; carbon leakage; competitiveness (search for similar items in EconPapers)
JEL-codes: D24 H23 L13 L74 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Carbon leakage and capacity-based allocations: Is the EU right? (2014)
Working Paper: Carbon Leakage and Capacity-Based Allocations. Is the EU right? (2014)
Working Paper: Carbon Leakage and Capacity-Based Allocations. Is the EU right? (2014)
Working Paper: Carbon leakage and Capacity-Based Allocations. Is the EU right? (2012)
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