The effectiveness of anti-leakage policies in the European Union: results for Austria

Abstract

With the third trading period of the EU emissions trading scheme (EU ETS) starting in 2013, the system of allocating emission allowances will significantly change: In contrast to the previous two trading periods, auctioning of the allowances should now be the rule rather than the exception. Accompanying this policy change, concerns over competitiveness of energy intensive, trade exposed sectors as well as over limited environmental effectiveness via the channel of carbon leakage, have regained prominence. In this paper, we thus explore the impacts of potential EU policies to counter losses in international competitiveness and carbon leakage from the perspective of Austria. Based on numerical simulations with a computable general equilibrium model, we evaluate three policy options: an input subsidy for carbon allowances (thus reflecting the planned partially free allocation mechanism in the third EU ETS phase), a subsidy for domestic production, and an export rebate based on sectoral CO 2 costs. Our results show that each policy has the potential to support domestic production in exposed sectors relative to a full auctioning scenario and thus increase competitiveness. However, none is imperatively effective at reducing Austria's net carbon emissions: while the carbon trade balance is improved and hence leakage declines, the tradability of emission permits within the EU ETS allows CO 2 emissions from Austria's ETS output to increase. A cost benefit analysis indicates that the two policies promoting domestic output and exports are more cost effective than the CO 2 input subsidy.

Current Status and Future Perspectives of Carbon Pricing Research in Austria

“…In Austria, more than 60% of them occur outside the country, and 34% are even outside the EU [15]. In the context of global supply chains, the authors of [54] point out that anti-leakage policies should be considered in the climate agenda. Nevertheless, if indirect production emissions are not also included in the country where those products are consumed, despite the reduction in global emissions, the gain will not materialize in the consumer GHG balance [60].…”

The Deployment of Low Carbon Technologies in Energy Intensive Industries: A Macroeconomic Analysis for Europe, China and India

“…This model of global trade, based on Bednar-Friedl et al [40,41] and Schinko et al [22] incorporates thirteen world regions listed in Table 1. Other emerging economies ECO 10 Latin America (w.o.…”

“…As in other modeling approaches, we implement combustion CO2 emissions on the production and household level, as these data are also included in the GTAP8 database [43]. As a further step we also explicitly model process CO2 emissions for relevant commodities such as steel as well as cement and chemical products in a Leontief fashion ( [40] based on [44]). …”

“…For the CGE model, the description follows the model structure shown in Figure 2 and sectoral model codes are used from Table 2. A detailed algebraic representation and information on the basic model parameterization can be found in Bednar-Friedl et al [40,41].…”

Band 3: Klimawandel in Österreich: Vermeidung und Anpassung. Kapitel 1: Emissionsminderung und Anpassung an den Klimawandel

“…Dieses Phänomen wird als Carbon Leakage (also Verlagerung von CO 2 -Emissionen) bezeichnet. Während Carbon Leakage für die erste und zweite Phase des EU Emissionshandels mit einer Größenord-nung von 10 bis 30 % nur eine untergeordnete Rolle spielte (Babiker, 2005;Babiker und Rutherford, 2005;Barker et al, 2007;Kuik and Hofkes, 2010;Paltsev, 2001), kann Carbon Leakage bei strengeren Zielen, einer Erstversteigerung der Emissionszertifikate und rasch wachsenden Schwellenländern in Zukunft zu einem größeren Problem werden (Bednar-Friedl et al, 2012). Rund 50 % des Carbon Leakage-Effekts entsteht über Feedbacks (Rückkoppelungen) von internationalen Rohstoffmärkten, da eine reduzierte Nachfrage nach fossilen Energieträgern in den regulierten Regionen zu einer Preisreduktion und somit zu einer Zunahme der Rohstoffnachfrage in nichtregulierten Ländern führt (Böhringer et al, 2010;Fischer und Fox, 2007).…”