Abstract. 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.

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp10086.pdf Non-technical summaryUsing advanced time-series techniques, this paper explores the ability of European refineries to pass-through costs associated with the introduction of the EU Emissions Trading Scheme (ETS). The paper thereby fills, the gap in the literature by analysing the interactions between petrol prices and emissions allowances allocated to the refining industry under the EU ETS at the single country level. The analysis is conducted within a multi-national framework and as comprehensive as the weekly data permits, covering 14 EU member states. Given the nonstationarity of variables and the existence of the long-run relationships between the analysed time series, the application of a vector error correction model (VECM) is appropriate. These econometric techniques allow tracking a price transmission process which is induced by the EU ETS in general and by free allocation of allowances in particular while accounting for short-run and long-run dynamics. Our econometric analysis shows that refineries were capable to pass-through prices of EUAs to consumers during the first trading period [2005][2006][2007]. It also discloses the heterogeneity across the EU member states in long-and short-run responses of petrol prices to movements of EUA prices. We run two alternative specifications of the VECM at the country level to check the robustness of the results. Our central finding questions the policy outcome in which emissions from the refining sector will be largely benefiting from free allocation of allowances from 2013 onwards, whereas the power sector falls fully under the auctioning regime. This measure has been introduced to minimise the undesirable distribution impacts that resulted from handing out free permits to the power sector in the "warm-up phase". This paper shows that adverse distributional impacts were also present over the same time horizon in the refining sector. Abstract: This paper explores the ability of European refineries to pass-through costs associated with the introduction of the EU Emissions Trading Scheme (EU ETS). We estimated a sequence of vector error correction models (VECM) within a multi-national setting which covers 14 EU member states. Using weekly data at the country level, this paper finds a significant influence of prices for European Union Allowances (EUAs) on unleaded petrol retail prices during the trial phase of the EU ET...

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp08061.pdf Non-Technical SummaryIn March 2007, the European Council has agreed upon an ambitious climate policy for the European Union. Given the present lack of an international agreement for the Post-Kyoto era, the EU has committed to an unilateral emission reduction target of 20% of greenhouse gases in 2020 vis-à-vis 1990 levels. However, such an unilateral abatement policy potentially endangers European competitiveness, while the relocation of energy-intensive industries outside Europe may substantially reduce its environmental effectiveness (the so-called 'carbon leakage' problem). To mitigate both detrimental effects, two remedies are currently under consideration in the EU policy arena: border tax adjustments (BTA) and integrated emission trading (IET). Border tax adjustments consist first of tariffs on imported goods mimicking an (environmental) tax on domestic goods and second of rebates for the domestic tax on exported goods. In contrast, under an integrated emission trading regime, foreign producers purchase emission certificates for imports into the EU, while domestic producers do not pay a duty on exports. This paper analyses both policy regimes within a theoretical and a numerical framework. In a stylized two-country model, we demonstrate that both policy options are suitable to address the negative competitiveness implications for domestic producers and to minimise the leakage problem. However, BTA is more effective in protecting domestic competitiveness, while IET reduces foreign emissions to a larger extent. Applying a multi-region, multi-sector general equilibrium model we analyse economic and environmental implications of an unilateral 20% reduction target for the EU including the offsetting policies. The results from our theoretical framework are confirmed for the energy-intensive sectors (covered by either BTA or IET), while the effect of the policy regimes on non-energy intensive sectors (not covered by BTA or IET) significantly modifies the results at the aggregate level: For the domestic energy-intensive and export-oriented sectors the choice between the BTA and IET regimes for the European Union is a matter of priority for protecting their competitiveness or inducing respective foreign energy-intensive sectors to reduce carbon emissions. In contrast, BTA has rather pronounced negative implications for the production level of the sectors not covered by...