Firm Competitiveness and the European Union Emissions Trading Scheme

By H. S. Chan, Shanjun Li, Fan Zhang. 2013

233 citations recorded by the source corpus.

The European Union Emissions Trading Scheme is the first international cap-and-trade program for carbon dioxide and the largest carbon pricing regime in the world. A significant concern over the Emissions Trading Scheme has been the potential impact on the competitiveness of industry. Using data on 5,873 firms in ten European countries during 2001-2009, this paper assesses the impact on three variables through which the effects on firm competitiveness may manifest -- unit material costs, employment and revenue. The analysis focuses on the three most heavily-emitting industries under the program -- power, cement, and iron and steel. Empirical results indicate that the Emissions Trading Scheme has had different impacts across these three sectors. Although no impacts are found on any of the three variables in the cement and iron and steel industries, a positive effect is found on both material costs and revenue in the power sector. The effect on material costs likely reflects fuel-switching to reduce carbon dioxide emissions, while that on revenue may be partly due to cost pass-through to consumers in a market that is less exposed to competition outside the Europen Union. Overall the findings do not substantiate concerns over carbon leakage, job loss or industry competitiveness during the study period.

Subfields: Economics and Econometrics, Environmental Engineering

View Paper: https://www.semanticscholar.org/paper/d80f06bfde8b22c6311469dd7996346a1797afc5

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Citations in the corpus

The Impact of Carbon Trading on Industry: Evidence from German Manufacturing Firms (2014, result): “While there is a fair amount of heterogeneity across studies and outcomes, they do not support the view that the EU ETS had strong detrimental effects on the economic performance of regulated firms.”
The Impacts of Environmental Regulations on Competitiveness (2017, background): “Chan et al. (2013) compare 5,873 regulated and non-regulated firms between 2001 and 2009 across 10 European Union countries in the power, cement and iron and steel sectors.”
The Impact of Carbon Emissions on Corporate Financial Performance: Evidence from the South African Firms (2018, background): “, [19] illustrated that emissions trading had no effect on cement, steel, and iron industries; however, it produced a positive impact on material costs (related expenses on abidance to emissions constraints or other parallel green programs) along with revenue in the power sector.”
Why does emissions trading under the EU Emissions Trading System (ETS) not affect firms’ competitiveness? Empirical findings from the literature (2018, background): “Across ten large countries, Chan et al. (2013) study firms in the power, cement, and iron and steel sectors, comparing ETS-regulated to non-ETS-regulated companies within each sector.”
On the empirical content of carbon leakage criteria in the EU emissions trading scheme (2014, background): “, 2013) does not suggest that industrial firms on the whole suffered strong adverse impacts when permits were allocated for free in the first years of the EU ETS (e.g. Abrell et al., 2011; Bushnell et al., 2013; Chan et al., 2013; Commins et al., 2011; Petrick and Wagner, 2014; Wagner et al., 2013).”
Carbon Tariffs: An Analysis of the Trade, Welfare and Emission Effects (2017, unknown): “some studies quantifying the carbon emission e ects of carbon tari s (see for a discussion section 2), to the best of our knowledge we are the rst to empirically implement the decomposition as in Copeland and Taylor (2003) based on a structural two-sector, multi-country framework.”
The Impact of the European Union Emissions Trading Scheme on Regulated Firms: What Is the Evidence after Ten Years? (2016, background): “In another study, Commins et al. (2011) study the impact of energy taxes and the EU ETS for a panel of 162,771 European firms between 1996 and 2007.”