Does the EU ETS Cause Carbon Leakage in European Manufacturing?

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Carbon leakage is an issue of major interest in both academic and policy debates about the effectiveness of unilateral climate policy addressing global externalities. The debate is particularly salient in Europe, where the EU Emissions Trading System (EU ETS) covers emissions of many traded sectors. In a first step, we review how carbon leakage and the pollution haven effect are defined and identified in the literature. In a second step, we evaluate whether the emission cost introduced by the EU ETS has caused carbon leakage in European manufacturing. We compute trade flows in embodied carbon and value, using GTAP trade and input-output data and administrative data from the EU ETS. We evaluate the effect of four measures of environmental stringency on both net trade flows and bilateral trade flows. We do not find evidence that the EU ETS has caused carbon leakage. Terms of use: Documents inJEL codes: F18, Q58, Q54 Keywords: Carbon leakage, pollution haven, EU ETS, cap-and-trade, CO 2 emissions, policy evaluation. * We thank conference participants in Zurich (EAERE), Lisbon (EARIE), Oviedo (EMEE) and Bergen (IAEE), and seminar participants in Toulouse and Berlin for fruitful discussions. We also thank Jan Abrell, Pio Baake, Sylvain Chabé-Ferret, Antoine Dechezleprêtre, Denny Ellerman, Christian von Hirschhausen, Philipp Richter, and Sebastian Schwenen for valuable comments. All remaining errors are ours.

The Impact of the Eu Emissions Trading System on Competitiveness and Carbon Leakage: The Econometric Evidence

“…To the best of our knowledge, so far only two studies (Dechezleprêtre et al ., ; Naegele and Zaklan, ) are also those testing for direct evidence of carbon leakage; that is, for whether emissions outside the EU increased as a consequence of the EU ETS. In this case, the very small number of works may be explained by the greater empirical challenges that the particular research question entails.…”

“…In the second, estimated effects can refer to participation in the EU ETS, to carbon prices or some other measure of regulatory stringency. Two of the studies employing panel data models (Costantini and Mazzanti, ; Naegele and Zaklan, ) more specifically estimate gravity‐type models stemming from international trade theory.…”

“…Naegele and Zaklan () investigate whether the EU ETS caused carbon leakage in European manufacturing sectors, as measured by changes in sector‐level international trade flows and related carbon movements. Sector‐level trade flows in embodied carbon and value are computed using detailed trade and input–output data (from the Global Trade Analysis Project) for the years 2004, 2007 and 2011.…”

Chapter VIII.26: Linking of climate change policies

“…While Jaffe and others (1995) find relatively little evidence that environmental policy has had an adverse effect on competitiveness, Dechezleprêtre and Sato (2017) confirm this finding but point towards recent evidence that shows that front-runners of ambitious environmental policies can lead to small adverse effects on trade, employment, plant location, and productivity, particularly for pollution and energy-intensive sectors. Aichele and Felbermayr (2012) suggest that the ratification of the Kyoto Protocol has caused carbon leakage, while Naegele and Zaklan (2017) do not find any evidence that the EU ETS has led to any carbon leakage.…”

Multinational Corporations and the EU Emissions Trading System: Asset Erosion and Creeping Deindustrialization?

“…However, the few ex-post studies for the EU ETS have so far not revealed any substantial leakage effect, neither via sectoral trade flows (e.g. Naegele and Zaklan 2016), nor through a rise in Foreign Direct Investment, analyzed for Italian MNEs by Borghesi et al (2016) and for German MNEs by Koch and Basse Mama (2016). The study that most closely shares our conceptual emphasis on potential intra-firm shifts of emissions is Dechezleprêtre et al (2015).…”