Carbon Leakage and capacity-based allocations: Is the EU right?

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 4029

Classification and Topics

• Classification: Wirtschaft ; Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity ; Oligopoly and Other Imperfect Markets ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; Construction
• Subject: cap and trade ; output based allocation ; subsidization of capacity ; climate policy ; carbon leakage ; competitiveness ; Verarbeitendes Gewerbe ; Energiekonsum ; Auslandsverlagerung ; Klimaschutz ; Emissionsrechte ; Allokation ; Luftverunreinigung ; Produktionskapazität ; Internationaler Wettbewerb ; Second Best ; Theorie ; EU-Staaten ; Australien

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Meunier, Guy ; Ponssard, Jean-Pierre ; Quirion, Philippe
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/69541
• Last update: 10.03.2025, 11:44 AM CET