The Effects of Domestic Climate Change Measures on International Competitiveness

18 Pages Posted: 20 Apr 2016

See all articles by Hiau Looi Kee

Hiau Looi Kee

World Bank - Development Research Group (DECRG)

Hong Ma

Tsinghua University - School of Economics & Management

Muthukumara Mani

World Bank

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2010

Abstract

Under the Kyoto Protocol, industrialized countries (called Annex I countries) have to reduce their combined emissions to 5 percent below 1990 levels in the first commitment period of 2008-12. Efforts to reduce emissions to meet Kyoto targets and beyond have raised issues of competitiveness in countries that are implementing these policies, as well as fear of leakage of carbon-intensive industries to non-implementing countries. This has also led to proposals for tariff or border tax adjustments to offset any adverse impact of capping carbon dioxide emissions. This paper examines the implications of climate change policies such as carbon tax and energy efficiency standards on competitiveness across industries, as well as issues related to leakage, if any, of carbon-intensive industries to developing countries. Although competitiveness issues have been much debated in the context of carbon taxation policies, the study finds no evidence that the energy intensive industries? competitiveness is affected by carbon taxes. In fact, the analysis suggests that exports of most energy-intensive industries increase when a carbon tax is imposed by the exporting countries, or by both importing and exporting countries. This finding gives credence to the initial assumption that recycling the taxes back to the energy-intensive industries by means of subsidies and exemptions may be overcompensating for the disadvantage to those industries. There is, however, no conclusive evidence that supports relocation (leakage) of carbon-intensive industries to developing countries due to stringent climate change policies.

Keywords: Climate Change Mitigation and Green House Gases, Climate Change Economics, Energy and Environment, Environment and Energy Efficiency, Transport Economics Policy & Planning

Suggested Citation

Kee, Hiau Looi and Ma, Hong and Mani, Muthukumara, The Effects of Domestic Climate Change Measures on International Competitiveness (May 1, 2010). World Bank Policy Research Working Paper No. 5309, Available at SSRN: https://ssrn.com/abstract=1606086

Hiau Looi Kee (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

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HOME PAGE: http://econ.worldbank.org/staff/hkee

Hong Ma

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

Muthukumara Mani

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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