The Competitiveness Impacts of Climate Change Mitigation Policies

Joseph Aldy and William Pizer

Scholarly Articles from Harvard Kennedy School of Government

Abstract: The pollution haven hypothesis suggests that unilateral domestic emission mitigation policies could cause adverse “competitiveness†impacts on domestic manufacturers as they lose market share to foreign competitors and relocate production activity – and emissions – to unregulated economies. We construct a precise definition of competitiveness impacts appropriate for climate change regulation that can be estimated exclusively with domestic production and net import data. We use this definition and a 20+ year panel of 400+ U.S. manufacturing industries to estimate the effects of energy prices, which is in turn used to simulate the impacts of carbon pricing policy. We find that a U.S.-only $15 per ton CO2 price will cause competitiveness effects on the order of a 1.0 to 1.3 percent decline in production among the most energy-intensive manufacturing industries. This amounts to roughly one-third of the total impact of a carbon pricing policy on these firms’ economic output.

Date: 2011
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
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Citations: View citations in EconPapers (31)

Published in HKS Faculty Research Working Paper Series

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http://dash.harvard.edu/bitstream/handle/1/5688779/RWP11-047_Aldy_Pizer.pdf (application/pdf)

Related works:
Working Paper: The Competitiveness Impacts of Climate Change Mitigation Policies (2015)
Working Paper: The Competitiveness Impacts of Climate Change Mitigation Policies (2014)
Working Paper: The Competitiveness Impacts of Climate Change Mitigation Policies (2011)
Working Paper: The Competitiveness Impacts of Climate Change Mitigation Policies (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hrv:hksfac:5688779

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