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Sectors under scrutiny: evaluation of indicators to assess the risk of carbon leakage in the UK and Germany

Sato, Misato, Neuhoff, Karsten, Graichen, Verena, Schumacher, Katja and Matthes, Felix (2014) Sectors under scrutiny: evaluation of indicators to assess the risk of carbon leakage in the UK and Germany. Environmental and Resource Economics, Online . ISSN 0924-6460

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Abstract

One of the central debates surrounding the design of the European Union Emissions Trading Scheme is the approach to address carbon leakage concerns. Correctly identifying the economic activities exposed to the risk of carbon leakage represents the first step in mitigating the risk effectively. This paper assesses the robustness of the quantitative assessment criteria used by the European Commission for Phase 3. For example we apply the criteria to data for UK and Germany and compare the results with the Commissions’ assessment conducted at the aggregated EU level. This reveals that sectors’ exposure risk to carbon leakage can vary across different Member States due to differences in production processes, technologies and fuel mix; process emissions; recycling rate differences; product mix differences; sector classification, statistical boundaries, activity allocation differences; and finally difference in data quality. Overall, we find that relative carbon intensity of sectors, measured as cost increase relative to gross value added, provides a robust metric. The analysis also highlights the importance of using high quality and disaggregated data for this assessment.

Item Type: Article
Official URL: http://www.springer.com/economics/environmental/jo...
Additional Information: © 2014 Springer
Library of Congress subject classification: G Geography. Anthropology. Recreation > GE Environmental Sciences
H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
Sets: Research centres and groups > Grantham Research Institute on Climate Change and the Environment
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 21 Feb 2014 11:51
URL: http://eprints.lse.ac.uk/55805/

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