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.

Cradle-to-cradle modeling of the future steel flow in China

“…where X j (t) is the trade of steel products; the price gap of domestic and international steel products; and, T is the price elasticity of export, whose range is 0.55-3.3 (Demailly and Quirion, 2008).…”

“…One general model (Demailly and Quirion, 2008) is used to describe the change of trade for steel products as shown in the following equation:…”

Did the EU ETS Make a Difference? An Empirical Assessment Using Lithuanian Firm-Level Data

“…Finally, our dataset spans the first and (most of) 3 There is a large body of literature attempting ex-ante "evaluation" exercises on the EU ETS. Böhringer, Hoffmann, Lange, Löschel, and Moslener (2005) and Kemfert, Kohlhaas, Truong, and Protsenko (2006), for example, present evidence at the aggregate level, whereas Neuhoff, Keats, and Sato (2006) and Demailly and Quirion (2008), among others, discuss sectorial impacts. 4 Ellerman, Convery, and de Perthuis (2010) and conclude that it is unlikely that there are significant volumes of low-cost CO 2 abatement possibilities with short response times in the Swedish electricity sector.…”

Winners and Losers of EU Emissions Trading: Insights from the EUTL Transfer Dataset

“…However, there is less consensus on whether or not industrial companies in some sectors can pass through the costs of carbon. Demailly and Quirion (2008) note that results in the iron and steel sector are highly dependent on the degree of competitiveness assumed in the market, while Ponssard and Walker (2008) note the importance of regional differences for the cement sector.…”