Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/172834
Authors: 
Zipperer, Vera
Sato, Misato
Neuhoff, Karsten
Year of Publication: 
2017
Series/Report no.: 
DIW Discussion Papers 1712
Abstract: 
Greenhouse gas emission benchmarks are widely implemented as a policy tool, as more countries move to implement carbon pricing mechanisms for industrial emissions. In particular, benchmarks are used to determine the level of free allowance allocation in emission trading schemes, which are distributed as a measure to prevent carbon leakage. This paper analyses how benchmark designs impact firms' production and business model decisions, particularly focusing on the coverage of direct and indirect emissions in the benchmark scope. We develop an analytical model and use the example of a steel mill to analyze and quantify how scope of indirect emissions coverage affect incentives. We seek to clarify generalized principles for efficient benchmark design, that provide a predictable policy framework for innovation and investment to decarbonize energy intensive industry.
Subjects: 
Emissions Trading
Emission Benchmarking
Free allocation
Incentives
Low-Carbon Innovation
JEL: 
D04
H25
L51
L61
Q58
Document Type: 
Working Paper

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