Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/283591 
Year of Publication: 
2023
Series/Report no.: 
ZEW Discussion Papers No. 23-069
Publisher: 
ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung, Mannheim
Abstract: 
Relative prices determine competitiveness of different locations. In this paper, we focus on the role of regulatory differences between Germany and other EU countries which affect the shadow price of carbon emissions. We calibrate a Melitz-type model, extended by firms' emissions and abatement decisions using data on aggregate output, trade and emissions. The parameter estimates are estimated from the German Manufacturing Census. The quantitative model allows us to recover a measure of how regulatory stringency evolved in the EU and Germany in terms of an implicit carbon price paid on emissions. This price reflects energy and carbon prices in addition to command-and-control measures and decreased from 2005 to 2019 in most sectors - both in Germany and other EU countries. The trend is more pronounced in Germany than in the rest of the EU. In counterfactual analyses, we show that this intra-EU difference has substantially increased German industrial emissions. Had the EU experienced the same decrease in implicit carbon prices as Germany, German emissions would have been substantially lower. Germany has increasingly become a pollution haven
Subjects: 
Carbon emissions
Climate Policy
Melitz model
Manufacturing
JEL: 
F18
H23
L60
Q56
Document Type: 
Working Paper

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