Mitigation of adverse effects on competitiveness and leakage of unilateral EU climate policy: An assessment of policy instruments

Abstract

a b s t r a c t a r t i c l e i n f oThe European Union (EU) has developed a strategy to mitigate climate change by cutting greenhouse gas (GHG) emissions and fostering low carbon technologies. However, the risk of implementing unilateral policies is that distortive effects are generated at the global scale affecting world energy prices, international competitiveness and the geographical allocation of carbon intensive production processes. Using a dynamic CGE model, we assess the rate of carbon leakage and adverse impacts on competitiveness in a number of scenarios over the period 2010-2050. According to the model results, we highlight two major issues. First, in the case of a unilateral EU climate policy, carbon leakage and negative effects on competitiveness are quite serious. Anti-leakage measures can only mitigate leakage and adverse economic impacts on competitiveness in a limited way. On the contrary, an optimality analysis addressing the environmental effectiveness, cost-effectiveness and political feasibility of alternative policy solutions reveals that the EU long term decarbonisation strategy by investing in energy efficiency and renewable energy might ensure protection of vulnerable manufacturing activities while enhancing the competitiveness of technologically-advanced industries.

A dynamic assessment of instrument interaction and timing alternatives in the EU low-carbon policy mix design

“…Moreover, values reported inTable 3refer to a NPV for the whole period 2015-2050. However, the GDP loss by 2050 comparing CT with BAU is 6.9% for the EU, in line with results obtained inAntimiani et al (2016).…”

“…Although it might seem an extreme view, this is due to the fact that the main objective of this work is to analyse the potential interactions between policy instruments in a unilateral climate policy case. Obviously, the unilateral abatement policy implies greater costs compared to the case in which also other countries implement mitigation actions (Antimiani et al, 2016). Additional work on how the EU policy mix could interact with alternative global scenarios will be part of future research.…”

Factor substitution in Swiss manufacturing: empirical evidence using micro panel data

“…Hence, it may be the case that such a flexible system prevents the mentioned possible harmful effects of pricing policies in Switzerland. Moreover, this approach might provide firms with incentives to innovate and reduce emissions, which has been empirically questioned for current policy instruments such as temporary compensation schemes ( Antimiani et al 2016 ). A flexible system of this kind may also be eligible for other countries.…”

“… 20 See Antimiani et al (2016) for an assessment of the rate of carbon leakage and negative effects on competitiveness in the EU. …”

Decarbonizing the transportation sector: policy options, synergies, and institutions to deliver on a low‐carbon stabilization pathway

“…The main message of the body of scientific literature on decarbonization scenarios has not changed substantively since the strengthened Paris Agreement targets were adopted . However, the analysis of Nationally Determined Contributions (NDCs) carried out by a number of authors shows that there is a substantial gap between the mitigation action needed and the proposed policy actions by countries . Recent analysis shows that urban passenger transport and surface freight transport need to play a major role in decarbonizing the sector, both in managing growth in emerging economies and drastically reducing emissions in industrialized economies, even more so when aiming for a 1.5°C stabilization pathway.…”