Conciliating industrial competitiveness and climate policy: Output-Based allocation of CO2 allowances or border adjustment? [Concilier compétitivité industrielle et politique climatique Faut-il distribuer les quotas de CO2 en fonction de la production]

D. Demailly and Philippe Quirion
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D. Demailly: Netherlands Environmental Assessment Agency (MNP), P.O. Box 303, Bilthoven 3720 - affiliation inconnue

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Abstract: We compare four proposals for the European Union greenhouse gas Emission Trading Scheme (ets): auctioning of allowances, distribution of allowances proportional to current output, auctioning with border adjustment, and a hybrid distribution with auctioning for power production and output-based allocation in the other sectors. We develop a partial equilibrium model of the eu 27 featuring three sectors covered by the ets: cement, steel and electricity, as well as aluminium, indirectly impacted through the electricity price. The co2 leakage rate ranges from 8% under auctioning to - 2% with the border adjustment, and varies a lot across sectors. The aggregate economic cost is the highest with output-based allocation and the lowest with the border adjustment. © Presses de Sciences Po.

Date: 2008
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Published in Revue Economique, 2008, 59 (3), pp.497-504. ⟨10.3917/reco.593.0497⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00716359

DOI: 10.3917/reco.593.0497

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