On the empirical content of carbon leakage criteria in the EU emissions trading scheme

By Ralf Martin, Mirabelle Muûls, L. Preux, Ulrich J. Wagner. 2014

142 citations recorded by the source corpus.

The EU Emissions Trading Scheme continues to exempt industries deemed at risk of carbon leakage from permit auctions. Carbon leakage risk is established based on the carbon intensity and trade exposure of each 4-digit industry. Using a novel measure of carbon leakage risk obtained in interviews with almost 400 managers at regulated firms in six countries, we show that carbon intensity is strongly correlated with leakage risk whereas overall trade exposure is not. In spite of this, most exemptions from auctioning are granted to industries with high trade exposure to developed and less developed countries. Our analysis suggests two ways of tightening the exemption criteria without increasing relocation risk among non-exempt industries. The first one is to exempt trade exposed industries only if they are also carbon intensive. The second one is to consider exposure to trade only with less developed countries. By modifying the carbon leakage criteria along these lines, European governments could raise additional revenue from permit auctions of up to €3 billion per year, based on a permit price of €30.

View Paper: https://www.semanticscholar.org/paper/befb6f57d01a0f2cc104603354d0230bfd5258d7

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Citations in the corpus

Searching for carbon leaks in multinational companies (2019, background): “Firms at risk of carbon leakage are defined as in Martin et al. (2014). Manufacturing firms are coded as “C-Manufacturing” in the NACE Rev.”
Carbon Leakage and Competitiveness of Cement and Steel Industries Under the EU ETS: Much Ado About Nothing (2016, background): “…abatement estimation (Ellerman and Buchner, 2008; Delarue et al., 2008), impact of investment and innovation (Calel and Dechezlepreˆtre, 2014; Martin et al., 2014), distributional effects (Sijm et al. 2006, de Bruyn et al. 2010, Alexeeva-Talebi 2011), determinants of the CO 2 price (Alberola…”
The Impact of Carbon Trading on Industry: Evidence from German Manufacturing Firms (2014, methodology): “The data were collected by Martin et al. (2013a) using a bias-reducing, “double-blind” telephone interview method developed by Bloom and van Reenen (2007).”
Why does emissions trading under the EU Emissions Trading System (ETS) not affect firms’ competitiveness? Empirical findings from the literature (2018, background): “Martin et al. (2014a) show that for most firms, the propensity to relocate does not fluctuate with the amount of free certificates.”