Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/69541
Authors: 
Meunier, Guy
Ponssard, Jean-Pierre
Quirion, Philippe
Year of Publication: 
2012
Series/Report no.: 
CESifo Working Paper: Energy and Climate Economics 4029
Abstract: 
Two main approaches have been implemented in regional CO2 markets to address competitiveness and carbon leakage: output based allocation (Australia, California, New Zealand) and capacity based allocation (EU). This paper characterizes the best policy, given that auctioning with border adjustment is excluded. A simple model is used in which the regional demand is subject to business cycles, and the import pressure depends on the demand level and capacity constraints. A combination of output and capacity based allocation is proved to be the optimal second best policy. The EU scheme for 2013-2020 is discussed, using cement as a case study.
Subjects: 
cap and trade
output based allocation
subsidization of capacity
climate policy
carbon leakage
competitiveness
JEL: 
D24
L13
H23
L74
Document Type: 
Working Paper

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