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Searching for carbon leaks in multinational companies

Dechezleprêtre, Antoine, Gennaioli, Caterina, Martin, Ralf, Muuls, Mirabelle and Stoerk, Thomas (2019) Searching for carbon leaks in multinational companies. CEP Discussion Papers (1601). Centre for Economic Performance, LSE, London, UK.

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Abstract

Does unilateral climate change policy cause companies to shift the location of production, thereby creating carbon leakage? In this paper, we analyse the effect of the European Union Emissions Trading System (EU ETS) on the geographical distribution of carbon emissions of multinational companies. The empirical evidence is based on unique data for the period 2007-2014 from the Carbon Disclosure Project, which tracks emissions of multinational businesses by geographical region. Because they al-ready operate from multiple locations, multinational firms should be the most prone to carbon leakage. Our data includes regional emissions of 1,122 companies, of which 261 are subject to EU ETS regulation. We find no evidence that the EU ETS has led to a displacement of carbon emissions from Europe towards the rest of the world, including in countries with no climate policy in place and within energy-intensive companies. A large number of robustness checks confirm this finding. Overall, the paper suggests that modest differences in carbon prices between countries do not induce carbon leakage.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/_new/publications/series.asp?...
Additional Information: © 2019 The Authors
Divisions: Grantham Research Institute
Centre for Economic Performance
Subjects: G Geography. Anthropology. Recreation > GE Environmental Sciences
H Social Sciences > HD Industries. Land use. Labor
JEL classification: F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms; International Business
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development; Environment and Trade; Sustainability; Environmental Accounting; Environmental Equity
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy
Date Deposited: 25 Nov 2019 15:03
Last Modified: 20 Feb 2020 00:25
URI: http://eprints.lse.ac.uk/id/eprint/102615

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