Understanding the impacts and limitations of the current instrument mix in detail: industrial sector

The Emission Trading Scheme of the European Union (EU ETS) is the main policy tool to reduce greenhouse gas emissions in the manufacturing industry. This report assesses whether the EU ETS had an impact on reducing the CO2 emissions in the cement sector. In addition, the report analyzes, whether the EU ETS has generated carbon leakage in the cement and steel sectors.

The results of the assessment show that the abatement from the EU ETS in the cement sector has been very limited and accounts (maybe) to 2%. Further conclusions that can be derived from the results of the report are that

  • the EU ETS has not reduced the energy intensity of clinker production;
  • there is no clear impact on the carbon intensity of the fuel mix;
  • the EU ETS seems to have reduced the clinker ratio by approximately 2 percentage points, compared to the historical trend.

Another conclusion of the report is that the EU ETS has not generated carbon leakage, at least in the short run (‘operational leakage’) in the cement and steel sectors. The analysis on this point is based on various econometric methods whose results converge, which provides confidence on the results robustness.

Attachment: 

Citation: 

Branger, Frédéric; Quirion, Philippe. 2013. Understanding the impacts and limitations of the current instrument mix in detail: industrial sector. CECILIA2050 WP2 Deliverable 2.2. Paris: Centre International de Recherche sur l’Environnement et le Développement.

Funding: 

European Commission

Authors: 

Mr Frédéric Branger, SMASH-CIRED, Mr Philippe Quirion, CNRS, SMASH-CIRED

Year of publication: 

2014

Number of pages: 

37

Table of contents: 

1

Executive summary

5

2

Introduction

5

3

Did the EU ETS reduce CO2 emissions in the cement sector?

6

3.1

Introduction

6

3.2

Cement production process and potential for abatement

7

3.3

Data sources

9

3.4

Evidence 

11

4

Carbon leakage and competitiveness of cement and steel industries under the EU ETS 

14

4.1

Introduction 

14

4.2

Literature review  

15

4.3

Industry contexts 

17

4.3.1

Cement

17

4.3.2

Steel

18

4.4

Methodology and data 

18

4.4.1

A simple analytical model

18

4.4.2

Estimated equation 

20

4.5

Econometric techniques 

21

4.6

Data 

22

4.7

Results 

23

4.7.1

Descriptive statistics 

23

4.7.2

Regression results 

27

5

Conclusion 

30

 

References

33