Date and Time
January 6, 2009
4:15 PM

Availability
Open to the public
No RSVP required

Speaker
Joseph Aldy - Fellow at Resources for the Future

Abstract
The pollution haven hypothesis suggests that unilateral (or more ambitious) greenhouse gas emission mitigation policies could cause adverse "competitiveness" impacts on domestic energy-intensive manufacturers as they lose market share to foreign competitors and relocate some production activity to unregulated economies.  We derive a theoretical definition of the competitiveness effect of an environmental regulation that motivates our empirical analyses.  Since emission mitigation policies will impose regulatory costs on firms through higher energy prices, we estimate the historical relationships between energy prices and production and consumption for 400+ manufacturing industries. We show that the difference in the effect of a change in energy prices on the change in production and the change in consumption represents the competitiveness effect of the climate change policy.  We use these results to simulate the impacts of a $15 per ton carbon dioxide price, and find that the competitiveness effects are on the order of 0.7 to 0.9 percent of production for the most energy-intensive industries. The direct costs of a climate policy regulation appear to dominate the competitiveness costs of a unilateral approach even for the most emission-intensive manufacturing industries.