This study develops and applies an analytical framework for examining the determinants of carbon leakage and competitiveness. The study has a long-term perspective and focuses on the European steel industry. For the case study, a CGE model is used to develop feasible scenarios of the evolution of competitiveness of the European steel industry and carbon leakage for alternative instrument mixes and alternative levels of global participation in climate change policies. The study finds that without any safeguards to the industry, and in the event of moderate climate ambitions in the rest of the world, an ambitious climate policy in Europe could lead to a significant loss of competitiveness of the steel sector and a high and increasing rate of carbon leakage.
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Table of contents:
|
1 |
Executive summary |
7 |
|
2 |
Introduction |
10 |
|
2.1 |
Background |
10 |
|
2.2 |
Statement of purpose and contents of the report |
10 |
|
3 |
Environmental regulation and industry location |
12 |
|
3.1 |
Introduction |
12 |
|
3.1.1 |
The Pollution Haven Effect |
12 |
|
3.1.2 |
The Porter Hypothesis |
14 |
|
4 |
Foreign direct investment and environmental regulation |
15 |
|
4.1 |
A model of foreign direct investment |
15 |
|
4.2 |
Environmental regulation and foreign direct investment |
20 |
|
5 |
Case study – the European steel sector |
22 |
|
5.1 |
Introduction |
22 |
|
5.2 |
The policy context |
24 |
|
5.3 |
Option and opinions |
25 |
|
6 |
A CGE model simulation |
27 |
|
6.1 |
Introduction |
27 |
|
6.2 |
Methodology |
27 |
|
6.2.1 |
The model |
27 |
|
6.2.2 |
Investment dynamics |
27 |
|
6.2.3 |
Innovations |
28 |
|
6.3 |
Data and assumptions |
29 |
|
6.4 |
Simulation design |
29 |
|
6.5 |
Assessment of policy options |
32 |
|
6.5.1 |
Middle of the Road (MR) |
32 |
|
6.5.2 |
Middle of the Road Plus (MR+) |
32 |
|
6.5.3 |
Middle of the Road Plus (MR+bas and MR+alt) |
34 |
|
6.5.4 |
Global Cooperation (GC) |
37 |
|
7 |
Conclusions |
38 |
|
8 |
References |
40 |
