The Competitiveness Impacts of Climate Change Mitigation Policies

Joseph Aldy and William Pizer

No 17705, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The pollution haven hypothesis suggests that unilateral domestic climate change mitigation policy would impose significant economic costs on carbon-intensive industries, resulting in declining output and increasing net imports. In order to evaluate this hypothesis, we undertake a two-step empirical analysis. First, we use historic energy prices as a proxy for climate change mitigation policy. We estimate how production and net imports change in response to energy prices using a 35-year panel of approximately 450 U.S. manufacturing industries. Second, we take these estimated relationships and use them to simulate the impacts of changes in energy prices resulting from a domestic climate change mitigation policy that effectively imposes a $15 per ton carbon price. We find that energy-intensive manufacturing industries are more likely to experience decreases in production and increases in net imports than less-intensive industries. Our best estimate is that competitiveness effects – measured by the increase in net imports – are as large as 0.8 percent for the most energy-intensive industries and represent no more than about one-sixth of the estimated decrease in production under a $15 per ton carbon price.

JEL-codes: F18 Q52 Q54 (search for similar items in EconPapers)
Date: 2011-12
New Economics Papers: this item is included in nep-ene, nep-env, nep-reg and nep-res
Note: EEE ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

Published as Joseph E. Aldy & William A. Pizer, 2015. "The Competitiveness Impacts of Climate Change Mitigation Policies," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(4), pages 565 - 595.

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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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