Ex-post investigation of cost pass-through in the EU ETS - an analysis for six industry sectors |
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| Affiliation: | 1. Erasmus School of Economics and Affiliated Researcher at IEB (Institut d''Economia de Barcelona), The Netherlands;2. Erasmus School of Economics, Erasmus University Rotterdam, P.O. Box 1738, 3000 DR, Rotterdam, The Netherlands;1. Institute of Sustainable Energy, Boston University, Boston, MA, United States;2. Department of Electrical & Computer Engineering, Aristotle University of Thessaloniki, Greece;3. Department of Mechanical Engineering, University of Thessaly, Volos, Greece;2. School of Economics and Management, China University of Geosciences, Beijing 100083, China;1. Business School, Sichuan University, Chengdu, 610065, China;2. School of Mathematical Science, Chongqing Normal University, Chongqqing, 401331, China;3. Chongqing Public Resources Trading Center, Chongqing, 400014, China;1. EconomiX (UMR 7235), Université Paris Nanterre, France;2. Climate Economics Chair, Institut Louis Bachelier, Paris, France;3. Grantham Research Institute, London School of Economics and Political Science, UK;4. Potsdam Institute for Climate Impact Research, Member of the Leibniz Association, Germany |
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| Abstract: | In the discussion on the potential risk of carbon leakage related to the EU ETS and the effect of safeguard measures, the scope for passing through carbon costs into final product prices is considered a key issue. This study investigates whether and to what extent ETS-related carbon costs have been passed through into product prices by EU industry. Literature on the issue of carbon cost pass-through in industry, other than electric power generation, is relatively sparse and we therefore aim to add to the knowledge gathered in this area so far. We investigate a number of products in six industry sectors in several European countries and regions and provide estimates for carbon cost pass-through for more than 50 product/country pairs. In line with the literature, our econometric results imply significant cost pass-through for a number of products, with results being most conclusive for the cement, iron and steel, and refineries sectors. The extent of the estimated pass-through rates diverges between products and countries/regions. These findings are aimed at informing discussions about carbon leakage protection for industries covered by the EU ETS. |
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