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Subglobal Climate Agreements and Energy‐intensive Activities: An Evaluation of Carbon Leakage in the Copper Industry
Author(s) -
Lanz Bruno,
Rutherford Thomas F.,
Tilton John E.
Publication year - 2013
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12051
Subject(s) - carbon leakage , relocation , greenhouse gas , leakage (economics) , monte carlo method , economics , copper , computable general equilibrium , elasticity (physics) , natural resource economics , environmental science , econometrics , climate policy , agricultural economics , microeconomics , macroeconomics , computer science , ecology , mathematics , statistics , chemistry , materials science , organic chemistry , composite material , biology , programming language
Abstract Subglobal climate policies induce changes in international competitiveness and favour a relocation of carbon‐emitting activities to nonabating regions. In this paper, we evaluate the potential for CO2abatement and the emissions ‘leakage’ effect in the copper industry, a prominent energy‐intensive trade‐exposed sector. We formulate a plant‐level spatial equilibrium model for copper commodities in which parameters describing the behavioural response of agents are calibrated to a set of estimated price elasticities. We find producers and consumers to be price inelastic even in the long run, making the copper industry unresponsive to climate policies. M onte C arlo simulations with our model based on statistical uncertainty on elasticity estimates suggest that around 30 per cent of emissions reductions in industrialised countries would be compensated by an increase of emissions in nonabating countries.