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Article Dans Une Revue Journal of Environmental Economics and Management Année : 2014

Carbon leakage and capacity-based allocations: Is the EU right?

Résumé

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.

Dates et versions

hal-01123272 , version 1 (04-03-2015)

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Guy Meunier, Jean-Pierre Ponssard, Philippe Quirion. Carbon leakage and capacity-based allocations: Is the EU right?. Journal of Environmental Economics and Management, 2014, 68 (2), pp.262-279. ⟨10.1016/j.jeem.2014.07.002⟩. ⟨hal-01123272⟩
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