Climate Policy and the Steel Industry: Achieving Global Emission Reductions by an Incomplete Climate Agreement

Mathiesen, Lars; Mæstad, Ottar

doi:10.5547/issn0195-6574-ej-vol25-no4-5

Cited by 71 publications

(47 citation statements)

References 17 publications

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“…In this section we deal with the latter and limit ourselves to three models that study the steel sector in detail. These are the models Steel Industry Model (SIM) (Mathiesen and Moestad, 2002), Steel Environmental strategy Assessment Program (STEAP) (Gielen and Moriguchi, 2001) and Prospective Outlook for the Long term Energy System (POLES) (Hidalgo et al, 2003). All three models take different steel production technologies into account.…”

Section: Results From Climate Policy Models On the Iron And Steel Sectormentioning

confidence: 99%

Climate policy: Bucket or drainer?

2006

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Worldwide, industry is responsible for about 40% of greenhouse gas (GHG) emissions, making it an important target for climate policy. Energy-intensive industries may be particularly vulnerable to higher energy costs caused by climate policy. If companies cannot offset rising energy costs and would face increased competition from countries without climate policy, they may decide to relocate their industrial production to the countries without climate policy. The resulting net effect of climate policy on GHG emissions in foreign countries is typically referred to as ''carbon leakage''. Carbon leakage may lead to higher global GHG emissions due to the use of less advanced technology in less developed countries. Based on a literature review of climate policy, earlier environmental policy and analyses of historical trends, this paper assesses the carbon leakage effects of climate policy for energy-intensive industries. Reviews of past trends in production location of energy-intensive industries show an increased global production share of Non-Annex 1 countries. However, from empirical analyses we conclude that the trend is primarily driven by regional demand growth. In contrast, climate policy models show a strong carbon leakage. Even though future climate policy may have a more profound impact than environmental policies in the past, the modelling results are doubtful. Leakage generally seems to be overestimated in current models, especially as potential positive spillovers are often not included in the models. The ambiguity of the empirical analyses and the modelling results warrants further research in the importance of production factors for relocation. r

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Section: Results From Climate Policy Models On the Iron And Steel Sectormentioning

confidence: 99%

Climate policy: Bucket or drainer?

2006

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“…To minimise leakage, however, scrap should be covered by the BA since in the case of steel, a part of leakage could come from the international scrap market: the EU ETS could increase scarp imports to the EU, as making steel from scrap generates much less emissions than steel from iron ore. As a consequence, the international price for scarp will increase, reducing the share of scrap in steelmaking in the rest of the world (Mathiesen and Maestad, 2004). The same issue applies to aluminium scrap.…”

Section: Targeted Productsmentioning

confidence: 99%

How to design a border adjustment for the European Union Emissions Trading System?

Monjon

Quirion

2010

Energy Policy

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Border adjustments are currently discussed to limit the possible adverse impact of climate policies on competitiveness and carbon leakage. We discuss the main choices that will have to be made if the European Union implements such a system alongside with the EU ETS. Although more analysis is required on some issues, on others some design options seem clearly preferable to others. First, the import adjustment should be a requirement to surrender allowances rather than a tax. Second, the general rule to determine the amount of allowances per ton imported should be the product-specific benchmarks that the European Commission is currently elaborating for a different purpose (i.e. to determine the amount of free allowances). Third, this obligation should apply when the exported product is registered at the EU border, and not after the end of the year as is the case for domestic emitters. Fourth, the export adjustment should take the form of a rebate on the amount of allowances a domestic emitter has to surrender. Five, this rebate should equal the abovementioned product-specific benchmarks, not the emissions of the particular exporting plant or firm. Finally, the adjustment does not have to apply to consumer products but mostly to basic products. Keywords AbstractBorder adjustments are currently discussed to limit the possible adverse impact of climate policies on competitiveness and carbon leakage. We discuss the main choices that will have to be made if the European Union implements such a system alongside with the EU ETS. Although more analysis is required on some issues, on others some design options seem clearly preferable to others. First, the import adjustment should be a requirement to surrender allowances rather than a tax. Second, the general rule to determine the amount of allowances per ton imported should be the product-specific benchmarks that the European Commission is currently elaborating for a different purpose (i.e. to determine the amount of free allowances). Third, this obligation should apply when the exported product is registered at the EU border, and not after the end of the year as is the case for domestic emitters. Fourth, the export adjustment should take the form of a rebate on the amount of allowances a domestic emitter has to surrender. Five, this rebate should equal the above-mentioned product-specific benchmarks, not the emissions of the particular exporting plant or firm. Finally, the adjustment does not have to apply to consumer products but mostly to basic products.

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“…Border adjustments have been assessed both through partial equilibrium models of a particular industry and through general equilibrium models. Mathiesen and Maestad (2004) simulate a carbon tax in Annex I, with and without border adjustments, in a global partial equilibrium model of the steel industry. They show that border adjustments tackle leakage very efficiently: a border adjustment based on average specific emissions (i.e.…”

Section: Border Adjustmentsmentioning

confidence: 99%

Addressing leakage in the EU ETS: Border adjustment or output-based allocation?

Monjon

Quirion

2011

Ecological Economics

104

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The EU ETS has been criticised for threatening the competitiveness of European industry and generating carbon leakage, i.e. increasing foreign greenhouse gas emissions. Two main options have been put forward to tackle these concerns: border adjustments and output-based allocation, i.e. allocation of free allowances in proportion to current production. We compare various configurations of these two options, as well as a scenario with full auctioning and no border adjustment. Against this background, we develop a model of the main sectors covered by the EU ETS: electricity, steel, cement and aluminium. We conclude that the most efficient way to tackle leakage is auctioning with border adjustment, which generally induces a negative leakage (a spillover). Another relatively efficient policy is to combine auctioning in the electricity sector and output-based allocation in exposed industries, especially if free allowances are given both for direct and indirect emissions, i.e. those generated by the generation of the electricity consumed. Although output-based allocation is generally less effective than border adjustment to tackle leakage, it is more effective to mitigate production losses in the sectors affected by the ETS.Keywords : Emission trading, border adjustment, output-based allocation, competitiveness, carbon leakage. Limiter les fuites dans le système européen d'échange de quotas d'émission de gaz à effet deserre : ajustement aux frontières ou allocation basée sur la production courante ? RésuméLe système européen d'échange de quotas d'émission de gaz à effet de serre (GES) a été critiqué comme menaçant la compétitivité de l'industrie européenne et comme générant des fuites de carbone, c'est-à-dire une augmentation des émissions de GES à l'étranger. Principalement, deux options ont été avancées pour traiter ces problèmes : l'ajustement aux frontières et l'allocation basée sur la production, c'est-à-dire une allocation gratuite de permis proportionnelle à la production courante. Nous développons un modèle représentant les principaux secteurs inclus dans le système européen de quotas (électricité, acier, ciment et aluminium) et analysons plusieurs configurations de chacune de ces options, ainsi qu'un scénario avec enchères et sans ajustement aux frontières. Nous trouvons qu'une allocation par l'intermédiaire d'enchères, complétée par un ajustement aux frontières, permet de limiter le plus les fuites de carbone, voire de diminuer les émissions dans les pays hors UE27 (fuites négatives). Une autre politique relativement efficace est de combiner des enchères pour le secteur de l'électricité et une allocation basée sur la production pour les secteurs exposés aux fuites de carbone, en particulier si la quantité de permis distribuée tient compte des émissions directes et indirectes (liées à la génération de l'électricité consommée). Bien que cette dernière option soit généralement moins efficace qu'un ajustement aux frontières pour limiter les fuites de carbone, elle permet néanmoins de réduire les pertes de...

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Climate Policy and the Steel Industry: Achieving Global Emission Reductions by an Incomplete Climate Agreement

Cited by 71 publications

References 17 publications

Climate policy: Bucket or drainer?

Climate policy: Bucket or drainer?

How to design a border adjustment for the European Union Emissions Trading System?

Addressing leakage in the EU ETS: Border adjustment or output-based allocation?

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