EU Emissions Trading Scheme, competitiveness and carbon leakage: new evidence from cement and steel industries

Mohamed Amine Boutabba () and Sandrine Lardic
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Mohamed Amine Boutabba: EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne

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Abstract: The European Union Emissions Trading Scheme (EU ETS) is the world's first large implementation of a CO 2 cap-and-trade system. The possibility that the EU ETS would have adverse effects on sectoral competitiveness is a major concern of policy-makers and industry. This paper analyses whether and to what extent cement and steel industries are exposed to carbon leakage. Prior studies focused on ex-post EU ETS analysis without taking structural breaks into account. Considering this gap in the literature, the present study attempts to provide new empirical evidence on the risk of carbon leakage under the EU ETS. Using rolling cointegration approach, our estimation results reveal that the impact of EU ETS on these two industries varies over time. Indeed, carbon price affects positively the net imports of cement and steel sectors over multiple subperiods, suggesting that these two industries are affected by a negligible carbon leakage and competitiveness losses. However, results reveal that the steel sector is more affected than the cement sector. Policy makers and industry could benefit from the findings of this study that provides a broader understanding of the future role of the EU ETS. © 2016, Springer Science+Business Media New York.

Keywords: Carbon leakage; Competitiveness; EU ETS; Rolling cointegration (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (13)

Published in Annals of Operations Research, 2017, 255, pp.47--61. ⟨10.1007/s10479-016-2246-9⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02877954

DOI: 10.1007/s10479-016-2246-9

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