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THE IMPACT OF THE EU EMISSIONS TRADING SYSTEM ON COMPETITIVENESS AND CARBON LEAKAGE: THE ECONOMETRIC EVIDENCE
Author(s) -
Verde Stefano F.
Publication year - 2020
Publication title -
journal of economic surveys
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.657
H-Index - 92
eISSN - 1467-6419
pISSN - 0950-0804
DOI - 10.1111/joes.12356
Subject(s) - carbon leakage , emissions trading , economics , leakage (economics) , empirical evidence , international economics , greenhouse gas , investment (military) , econometric model , macroeconomics , monetary economics , econometrics , ecology , philosophy , epistemology , politics , political science , law , biology
This paper carefully surveys the econometric literature that tests for competitiveness effects and related carbon leakage caused by the EU Emissions Trading System (EU ETS). The results of this literature tell us that to date there is no evidence of the EU ETS having had widespread negative or positive effects on the competitiveness of regulated firms, nor is there evidence of significant carbon leakage. However, the paper also identifies three important caveats to this general conclusion. Firstly, the evidence we have still largely refers to the first two trading periods, namely Phases I (2005–2007) and II (2008–2012). Secondly, some heterogeneity of estimated effects is observed, but patterns, notably sectoral patterns, hardly emerge. Thirdly, very little explored is whether the EU ETS has had long‐term effects on the economy via investment leakage or firm dynamics. Further empirical studies investigating these long‐term effects are particularly desirable.