addressing leakage in the eu ets border adjustment or output based allocation 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 this holds even if the border adjustment does not include indirect emissions if it is based on eu rather than foreign specific emissions or for some values of the parameters if it covers only imports 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 which may ease climate policy adoption c 2011 elsevier b v all rights reserved

armington elasticities for energy policy modeling evidence from four european countries elasticities of substitution among imports and competing domestic production armington elasticities play an important role in computable general equilibrium cge assessments of energy and climate policy this paper provides estimates of armington elasticities for 15 commodity groups in four european countries since armington elasticities are found to be rather low on average researchers may want to reconsider the device of using high values of armington elasticities in cge models to avoid unrealistic competitiveness effects or emission leakage rates associated with energy or carbon taxes or other forms of energy related regulation estimated elasticities tend to be higher in the case of machinery and other investment goods than in the case of primary products ores and chemicals as well as consumer goods

carbon leakage and capacity based allocations is the eu right competitiveness and carbon leakage are major concerns for the design of co2 emissions permits markets in the absence of a global carbon tax and of border carbon adjustments output based allocation is a third best solution and is actually implemented australia california new zealand the eu has followed a different route free allowances are allocated to existing or new capacities in proportion to a benchmark independent of actual production this paper compares these two schemes in a formal setting and shows that the optimal one is in fact a combination of both schemes or output based allocation alone if uncertainty is limited a key assumption of our analysis is that the short term import pressure depends both on the existing capacities and the level of demand which is typical in capital intensive and internationally traded sectors a calibration of the model is used to discuss the eu scheme for the cement sector in the third phase of the eu ets 2013 2020 this allows for a quantification of various policies in terms of welfare investment production company profits public revenues and leakage

impacts of eu carbon emission trade directive on energy intensive industries indicative micro economic analyses the cost impacts from the european emission trading system ets on energy intensive manufacturing industries have been investigated the effects consist of direct costs associated to the co2 reduction requirements stated in the eu directive and of indirect costs of comparable magnitude that originate from a higher electricity price triggered by the ets in the power sector the total cost impacts remain below 2 of the production value for most industries within the ets in the kyoto period in the post kyoto phase assuming a 30 co2 reduction the total cost impact may raise up to 8 of production value in the heaviest industry sectors in steel and cement industries the cost impacts are 3 4 fold compared to the least affected pulp and paper and oil refining electricity intensive industries outside the ets will also be affected for example in aluminum and chlorine production the indirect cost impacts from ets could come up to 10 of production value already in the kyoto period as industry sectors are affected differently by the ets some correcting mechanisms may be worthwhile to consider in securing the operation of the most electricity intensive sectors e g balancing taxation schemes that may include as income source a levy on the wind fall profits of the power sector due to ets a future improvement in ets for industries within the scheme could be scaling of the emission reduction requirement so that the relative total emission reduction costs are at about the same level

climate policy bucket or drainer abstract 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

spatial competition with a land market hotelling and von thunen unified we introduce into the standard spatial competition model the consumption of land by households and study the spatial competition under the influence of a land market in contrast to the standard assumption of a fixed given distribution of households we introduce the possibility of households relocation in reaction to firms location decisions thus the spatial distribution of households is treated as endogenous and a land market is introduced on which households compete for land use households consume simultaneously land and firms output accordingly the demand of each household becomes in turn endogenous as it depends on the income left after the land rent is paid not surprisingly the results obtained within this more general framework prove to be very different from the standard results for example in the 2 and 3 firm cases the optimal configuration of firms is a nash equilibrium when transport costs are high enough or the amount of vacant land is large enough the existence property is restored in the 3 firm case when the transport costs are high enough the introduction of vacant land causes a discontinuous change in the set of equilibrium configurations

border adjustments supplementing nationally determined carbon pricing as agreed on in the paris agreement each country determines its own contribution to combat climate change on a voluntary basis there is no mechanism to force a country to comply with its own nationally determined contributions this bottom up approach builds on unilateral actions and yields a kind of carbon pricing which is not necessarily identical across countries as a consequence these nationally determined climate policies have drawbacks in terms of carbon leakage and loss of competitiveness for firms producing in high carbon price countries to reduce these negative effects border adjustments bas may be appropriate subsequent to more stringent environmental regulation we model a three stage game involving carbon price competition in the first stage the introduction of bas in the second stage and oligopolistic competition between firms in the third stage strategic trade theory suggests that the qualitative results about the optimal ba policy may vary with the underlying type of competition namely bertrand and cournot competition however our results are similar for both types of competition we conclude that bas are suitable for supporting a more stringent environmental policy moreover we find that anticipation of the implementation of bas in the second stage yields higher average carbon prices in the first stage since high carbon price countries increase their carbon prices whereas the other countries partially offset

carbon footprint taxes we analyze whether a carbon consumption tax is logistically feasible we consider a carbon footprint tax cft which would be modeled after a credit method value added tax the basis for the tax would be a product s carbon footprint which includes all of the emissions released during production of the good and its inputs as well as any greenhouse gases latent in the product our analysis suggests that a pure cft requiring the calculation of the carbon footprint of every individual product may be prohibitively costly however a hybrid cft seems economically feasible the hybrid cft would give firms the option to either calculate the carbon footprint of their outputs and have their products taxed based on those footprints or use product class specific default carbon footprints as the tax basis thereby saving on calculation costs because the cft would be levied on all goods consumed domestically the cft would keep domestic firms on an even footing with those producing in countries without active climate policy protecting competitiveness and reducing leakage

windfall profits under pollution permits and output based allocation this paper analyzes the implementation of pollution permits it focuses on the distributional impacts linked with the stringency of output based allocation when two sectors are covered by the market for permits and the total cap is held constant a new type of profit increase in sectors that are not exposed to international competition when energy intensive trade exposed eite sectors are granted output based allocations is demonstrated theoretically the paper also illustrates a profit increase in the electricity sector in a possible fourth phase of the european union emission trading scheme in which output based allocation will be granted to eite sectors compared with the case in which all permits are auctioned

marginal co2 cost pass through under imperfect competition in power markets abstract in line with economic theory carbon ets determines a rise in marginal cost equal to the carbon opportunity cost regardless of whether carbon allowances are allocated free of charge or not this paper aims at evaluating to what extent firms in imperfectly competitive markets will pass through into electricity prices the increase in cost by using the load duration curve approach and the dominant firm with competitive fringe model we show that the result is ambiguous the increase in price can be either lower or higher than the marginal co2 cost depending on several structural factors the degree of market concentration the available capacity whether there is excess capacity or not the power plant mix in the market and the power demand level peak vs off peak hours the empirical analysis of the italian context an emblematic case of imperfectly competitive market which can be split into four sub markets with different structural features provides a contribution supporting the model predictions market power therefore would determine a significant deviation from the full pass through rule but we cannot know the sign of this deviation a priori i e without before taking carefully into account the structural features of the power market

european emission trading scheme and competitiveness a case study on the iron and steel industry abstract we quantify the impact of the european emission trading scheme ets on the two dimensions of competitiveness production and profitability for the iron and steel industry among those covered by the scheme this sector is one of the most exposed since it is both highly co 2 intensive and relatively open to international trade we also examine the robustness of these results to various assumptions marginal abatement cost curve trade and demand elasticities as well as pass through rates and updating of allocation rules of which the latter two are scarcely debated we conclude that for this sector competitiveness losses are small we prove this conclusion to be robust hence arguments against tightening the environmental stringency of the ets in phase ii are not justified on grounds of competitiveness loss our systematic sensitivity analysis allows us to identify the important assumptions for each output variable it turns out that pass through rates and updating rules are significant despite being often implicit and least debated in existing analyses

the new resource economics old ideas and new applications the role of any science is systematically to reduce indeterminacy and it is on this basis that scientific paradigms are judged as kuhn notes paradigms gain their status because they are more successful than their competitors in solving a few problems that the group of practitioners have come to recognize as acute p 23 in the economics profession the neoclassical model based on marginal analysis has gained this status because of its success in reducing indeterminacy due to this success economists interested in natural resources and environmental problems have adopted the neoclassical approach by no means however has the adoption of the neoclassical paradigm eliminated methodological debate or led to conclusions accepted by all members of the profession as randall suggests

does ecological economics have a future contradiction and reinvention in the age of climate change abstract this paper addresses the role of neoclassical methodologies in ecological economics and the contradictions these methodologies pose to the field s critical founding principles we first consider robert costanza s treatment of nicholas stern s global deal and then survey climate change related articles published in this journal over the past five years this survey reveals how mainstream neoclassical methodologies dominate discourse and do so by marginalizing more critical political economy analyses this situation imperils the field s founding vision of a no growth steady state it also fails to address the related growth dynamics of capitalism without such a critical treatment the field s formal embrace of methodological pluralism actually entails an ideological empiricism that renders ecological economics theoretically incoherent this situation undermines the field s historical promise as an alternative economic paradigm ecological economics now faces a problematic future its survival in a form faithful to its founding vision will require an explicit choice to address its internal contradictions and reinvent itself in ways relevant to our contemporary context without such a choice ecological economics will likely succumb to an implicit acceptance of the hegemony of mainstream economic methodologies and their pro growth imperatives

asymmetric equilibria in spatial competition abstract the main purpose of this paper is to study the impact of consumer concentration around the market center on the equilibrium locations of location price games in the case of symmetric triangular density it is shown that no symmetric equilibrium exists however we demonstrate the existence of asymmetric equilibria in pure strategies these equilibria are also characterized our secondary purpose is to study the sequential entry of two firms when the location space is not restricted to the market space this leads us to uncover a substantial first mover advantage which has been neglected in the literature

is zoning a negative sum game zoning is well known as a key instrument of planning regulation which is environmental regulation in its broadest sense zoning in terms of economic theorisation is normally justified by the pigovian welfare economics theses of market failure notably

border carbon adjustments addressing emissions embodied in trade approximately one fourth of global emissions are embodied in international trade and a significant portion flows from non carbon priced to carbon priced economies border carbon adjustments bcas figure prominently as instruments to address concerns arising from unilateral climate policy estimating the volume of emissions that could be potentially taxed under a bca scheme has received little attention until now this paper examines how a number of issues involved in the implementation of bcas can affect their ability to cover emissions embodied in trade and thus address carbon leakage these issues range from ensuring compliance with trade provisions and assumptions on the carbon intensity of imports to determining which countries are included and whether intermediate and final demand are considered here we show that the volume of co2 captured by a scheme that involved all annex b countries could be significantly reduced due to these issues particularly by trade provisions such as the principle of best available technology bat as a consequence the tariff burdens faced by non annex b parties could dwindle considerably these findings have important policy implications as they question the effectiveness and practicalities of bcas to reduce carbon leakage and alleviate competitiveness concerns adding further arguments against their implementation

duopoly locations and optimal zoning in a small open city abstract this paper analyzes a duopoly location model with an asymmetric zoning that prohibits firms from locating to a specific interval in a small open linear city it is shown that the maximum differentiation principle presented in d aspremont et al econometrica 47 1979 1145 is still valid under area zoning regulation moreover a zoning regulation can be seen as a policy instrument to limit firms excess profits and a proper regulation may even reduce the distortion in total transportation costs therefore enhancing social welfare specifically the optimal zoning is about 29 5 percent of the city with no amenity effect finally all the land rents raised by zoning are eventually confiscated by the absentee landowner

the value added of sectoral disaggregation implications on competitive consequences of climate change policies global impact assessment of unilateral climate policies is commonly based on multi sector multi region computable general equilibrium cge models that are calibrated to consistent accounts of production consumption and bilateral trade flows however global economic databases such as gtap treat energy intensive and trade exposed industries rather in aggregate thereby missing potentially important details on the heterogeneity of these sectors in this paper we elaborate on the availability of data resources and methodological issues in disaggregating energy intensive and tradeexposed sectors that receive larger attention in the public policy debate on unilateral emission regulation non ferrous metals iron and steel and non metallic minerals our sensitivity analysis revolves around three types of unobserved heterogeneity at the sub sectoral level trade elasticities energy consumption and technology specifications drawing on the example of border tax adjustments we find that for all given technology specifications and variation in energy shares the biggest differences emerge from variations in armington elasticities even moderate changes in armington elasticities can alter the magnitude and the sign of the effects at the sectoral level the implications of sub sectoral disaggregation are not as pronounced for macroeconomic indicators and leakage as for sectoral indicators

output based allocations in pollution markets with uncertainty and self selection we study pollution permit markets in which a fraction of permits are allocated to firms based on their output output based allocations which are receiving increasing attention in the design of carbon markets around the world e g europe california new zealand are shown to be optimal under demand and supply volatility despite the output distortions they may create in a market that covers multiple sectors the optimal design combines auctioned permits with output based allocations that are specific to each sector and increasing in its volatility when firms are better informed about the latter or must self select the regulator resort to some free i e lump sum allocations to sort firms out numerical exercises illustrate the policy relevance of our results the gains from considering output based allocations can be substantial

minimum quality standards and collusion we model the introduction of a minimum quality standard in a vertically differentiated duopoly we extend the literature in determining the standard endogenously showing that the maximisation of social welfare entails an increase in the surplus accruing to consumers served by the low quality firm and a decrease in the surplus of the remaining consumers then we consider the effects of the standard on the stability of price collusion proving that the standard makes it more difficult for firms to collude if consumers are sufficiently rich

parcelling virtual carbon in the pollution haven hypothesis the methodology proposed in this paper allows us to parcel the pollution haven hypothesis phh into a bi regional input output framework to analyse whether the specialisation of countries in different stages of production and or in final goods trading generates an increase or a decrease in global emissions as a consequence of international trade we apply the model to the spain china trade relationship as it existed in 2005 finding a phh of 29 667 ktco2 if this trade had not existed so each country had met its demand for intermediate and final goods global emissions would have been reduced by these 29 667 ktco2 of this phh 43 5 corresponds to imports of final goods 32 4 is related to imports of intermediate goods for the last stage of production the remainder 24 1 is caused by global value chains gvc between the countries only 3229 ktco2 of phh emissions are linked to domestic emissions from the sector in which the imports are produced the rest is explained by domestic linkages or successive rounds of domestic production which supports the existence of an indirect phh together with a trade growth in the last years the fall of trade barriers would have implied a transformation of global production chains that have boosted global emissions

factors shaping aggregate energy intensity trend for industry energy intensity versus product mix understanding the mechanisms of change of energy consumption in industry has attracted much attention since the 1973 world oil crisis a popular line of research has been to decompose changes in the aggregate energy intensity of industry to give the relative impacts arising from energy intensity change and product mix change using a decomposition technique many empirical studies covering a large number of countries have been reported the main objective of this paper is to put together the empirical results reported in these studies in a coherent framework and identify possible systematic features of particular interest are the basic trends in this line of research the relative importance of energy intensity change and product mix change possible variations over time and between country groups in the energy impacts of these changes and inconsistencies in findings among studies an overview of the decomposition technique including its strengths weaknesses and role in industrial energy consumption studies is also presented

between a rock and a hard place a trade theory analysis of leakage under production and consumption based policies without a comprehensive global climate agreement carbon leakage remains a contentious issue consumption based pricing of emissions which could in practice be implemented with a full border tax adjustment bta has been forwarded as an option to increase the effectiveness of unilateral climate policy this paper questions the economic rationale behind this approach using a theoretical 2 times 2 trade model in which leakage occurs through terms of trade effects we show analytically first that consumption based pricing of emissions does not necessarily result in less leakage than production based policies second the sign of the optimal unilateral carbon tariff depends on the carbon intensity differential between the foreign country s exporting and non exporting sectors and not on the differential between home s and foreign s exporting sectors as implied by the full bta approach third based on empirical data for the year 2004 our model implies that full bta applied by the european union on e g imports from and exports to china would by shifting china s production from the export sector with a relatively low carbon intensity towards the more carbon intensive non export sector actually increase leakage

unilateral co2 reductions and carbon leakage the consequences of international trade in oil and basic materials a recursively dynamic general equilibrium model featuring six world regions with trade in energy and non energy goods is used to simulate the period from 1990 through 2100 in 10 year intervals the simulations explore the effect of unilateral action by the oecd to curb global co2 emissions unilateral cuts create incentives for free riding by non participating regions so that global emissions are reduced by less than the amount that the oecd cuts back its regional emissions carbon leakage occurs through two channels first basic materials production increases in unconstrained regions resulting in increased carbon intensity of gdp second reductions in oecd oil imports cause the world oil price to fall leading to an increased energy intensity in the non participant regions in this paper we use a general equilibrium model to assess the extent to which these two mechanisms reduce the effectiveness of oecd reductions in curbing global co2 concentrations

taxing consumption to mitigate carbon leakage this is a post print version of an article published in environmental and resource economics made available in accordance with the copyright policy of the journal publisher no commercial re distribution or re use is allowed this version may contain minor differences from the journal s pdf version

border adjustment for european emissions trading competitiveness and carbon leakage unilateral or sub global policies to combat climate change are potentially sensitive to free riding and carbon leakage one way of dealing with carbon leakage and competitiveness is the imposition of border adjustment measures for competing imports for example in the form of the obligation to importers of goods to purchase and surrender emissions allowances to the authorities when importing in this paper we explore some implications of border adjustment measures in the eu ets for sectors that might be subject to carbon leakage we examine the implications of two variants of these measures on the competitiveness of these sectors and on the global environment with the help of a multi sector multi region computable general equilibrium cge model of the global economy our calculations suggest that border adjustment might reduce the sectoral rate of leakage of the iron and steel industry rather forcefully but that the reduction would be less for the mineral products sector including cement the reduction of the overall or macro rate of leakage would be modest so from an environmental point of view border tax adjustments would not be a very effective policy measure but might mainly be justified by considerations of sectoral competitiveness

trade from resource rich countries avoids the existence of a global pollution haven hypothesis abstract free trade agreements are currently receiving much attention in the media and politics one important question concerning free trade is its effect on the environment for example in carbon dioxide emissions the goal of this paper is to provide evidence on the validity of the pollution haven hypothesis using a multi regional input output approach for six regions and the rest of the world as a whole our findings indicate that in the period from 1995 to 2009 international trade has allowed the global economy to reduce its overall co2 emissions compared to a hypothetical situation without international trade the total amount of emissions saved was 15 06 gt in the period under consideration however not all of the seven regions in our model have been able to reduce their co2 emissions through trade global value chains have led to china becoming a pollution haven for other regions and its exports have increased world emissions to 1 28 gt co2 in 2008 however what allows a net saving of emissions on a global scale is the supply of energy and natural resources from a set of peripheral economies which in our geographical categorization are mostly integrated in the region of the rest of the world

comparing policies to combat emissions leakage border carbon adjustments versus rebates we explore conditions determining which anti leakage policies might be more effective complements to domestic greenhouse gas emissions regulation we consider four policies that could be combined with unilateral emissions pricing to counter effects on international competitiveness a border charge on imports a border rebate for exports full border adjustment and domestic output based rebating each option faces different potential legal hurdles in international trade law each also has different economic impacts while all can support competitiveness none is necessarily effective at reducing global emissions nor is it possible to rank order the options effectiveness depends on the relative emissions rates elasticities of substitution and consumption volumes we illustrate these results with simulations for the energy intensive sectors of three different economies the united states canada and europe although most controversial full border adjustment is usually most effective but output based rebating for key manufacturing sectors can achieve many of the gains

the effects of border crossing frequencies associated with carbon footprints on border carbon adjustments abstract the fragmentation of production across national boundaries has become an important feature of the world economy this present paper adopts the viewpoint that not only the size and composition of carbon footprints are relevant but also the border crossing frequency associated with these carbon footprints which is defined as the number of borders a product crosses in a supply chain this process will affect the spatial accounting of the carbon emissions produced to support the economic activity the calculation of border crossing frequencies of carbon footprint is accomplished by decomposing the leontief inverse matrix derived from the world input output database we find that the aggregated average border crossing frequencies of carbon footprints show an increasing tendency which is influenced by the economic crisis obviously the policy application focuses on the united states which we assume to levy carbon tariffs on foreign emissions embodied in imports we find that the indirect carbon tariff on emissions embodied in international trade take a significant share the border carbon adjustments are mainly targeted at emissions generated in china which also pays the greatest share of the tariff burden the implication of carbon tariffs faces the problem of multiple taxation

output based rebating of carbon taxes in a neighbour s backyard competitiveness leakage and welfare we investigate how in an open economy carbon taxes combined with output based rebating obr perform in interaction with the carbon policies of a large neighbouring trading partner analytical results suggest that whether the purpose of the obr policy is to compensate firms for carbon tax burdens or to maximize welfare accounting for global emission reductions the obr rate should be positive in policy relevant cases numerical simulations for canada with the us as the neighbouring trading partner indicate that the impact of us policies on the obr rate will depend crucially on the purpose of the canadian obr policies if for a given us carbon policy canada s aim is to restore the competitiveness of domestic emission intensive and trade exposed eite firms to the same level as before the introduction of its own carbon taxation we find that the necessary domestic obr rates will be insensitive to the foreign carbon policies however if not only the canadian carbon tax but also an equally high us tax is introduced compensatory canadian obr rates will be up to 50 lower depending on the sector and on us obr policy if the policy objective is to increase economy wide allocative efficiency welfare of canadian policies by accounting for carbon leakage the us policies will have only a minor downward pressure on desirable obr rates in canada practical choices of obr rates hardly affect overall domestic economic performance thus output based rebating qualifies as an instrument for compensating eite industries without a large sacrifice in terms of economy wide allocative efficiency

environmental taxes and international spillovers the case of a small open economy abstract in the existence of trade interaction a sub global climate change policy can generate externality which can cause competitiveness issues for the producers in compliant regimes however among compliant regions a small economy also receives a significant spillins effect when a large economy takes some regulatory actions that affect particularly the world prices of traded commodities this externality can have notable impacts on the efficiency and pollution abatement opportunities of the small compliant regime with a trivial converse effect in some cases these impacts on the efficiency and emissions abatement can be in opposite directions we capture these findings by incorporating two protection polices i e border tax adjustment and free emissions allocations to emission intensive and trade exposed industries in a multi region analytical and numerical general equilibrium modeling framework these results convey that the large economies hold leading strategic positions towards a cooperative global climate change movement because of their policies influences on the small economies

using output based allocations to manage volatility and leakage in pollution markets abstract output based allocations obas are typically used in emission trading systems ets with a fixed cap to mitigate leakage in sectors at risk recent work has shown they may also be welfare enhancing in markets subject to supply and demand shocks by introducing some flexibility in the total cap resulting in a carbon price closer to marginal damage we extend previous work to simultaneously include both leakage and volatility we study how oba permits can be implemented under an overall cap that may change with the level of production in contrast with a design that deducts oba permits from the overall permit allocation as is the current practice in the eu ets and california we show that introducing oba permits while keeping the overall cap fixed would only increase price fluctuations and induce severe welfare losses to non oba sectors

assessment of european union transition scenarios with a special focus on the issue of carbon leakage this paper uses the model gemini e3 to simulate and assess the transition scenario to 2020 framed by the european union in its energy climate directive and it raises several issues in this connection after a brief description of the model the paper presents the results of the scenarios mainly the values of the major indicators of carbon price both in the ets and in non ets sectors and the welfare cost of the eu policy under the various configurations considered while it is independent of the scenario in the ets sector in the non ets sector the value of carbon is very sensitive to the provisions of the directive and in particular the option of resorting to the flexibility mechanisms the welfare cost also varies significantly according to scenarios and its value for the entire eu is more than double in the scenario closest to the directive as compared to the least cost one the paper also addresses the very sensitive issue of carbon leakage and argues in favor of a new concept of net leakage the analysis shows that while carbon leakage may affect some specific sectors at the aggregate level it does not represent a real concern with a magnitude of at most a few percent of ghg abatement by annex b countries

robust policies to mitigate carbon leakage abstract unilateral climate policy induces carbon leakage through the relocation of emission intensive and trade exposed industries to regions without emission regulation previous studies suggest that emission pricing combined with border carbon adjustment is a second best instrument and more cost effective than output based rebating we show that the combination of output based rebating and a consumption tax for emission intensive and trade exposed goods can be equivalent with border carbon adjustment moreover it is welfare improving for a region that implements emission pricing along with output based rebating to introduce such a consumption tax the welfare gain is particularly large if output based rebating is already implemented for a sector that is not much exposed to leakage e g due to uncertainty about exposure or due to lobbying activities thus supplementing output based rebating with a consumption tax constitutes robust policies to mitigate carbon leakage

duopoly and quality standards abstract in the absence of sunk costs a low quality producer benefits from a mildly restrictive quality standard whereas a high quality producer suffers from it consumers welfare increases if the firm producing the higher quality does not increase its quality significantly in response to the increase in quality by its rival a sufficiently severe standard causes exit from the industry when there are no sunk cost the high quality producer exits first