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The Competitiveness Impacts of Climate Change Mitigation Policies

Year: 2015

Type: article

Abstract: The pollution haven hypothesis suggests that unilateral domestic climate change mitigation policy would impose significant economic costs on carbon-intensive industries, resulting in declining output and increasing net imports. In order to evaluate this hypothesis, we undertake a two-step empirical analysis. First, we estimate how production and net imports change in response to energy prices using a 35-year panel of approximately 450 US manufacturing industries. Second, we use these estimated relationships to simulate the impacts of changes in energy prices resulting from a $15 per ton carbon price. We find that energy-intensive manufacturing industries are more likely to experience decreases in production and increases in net imports than less-intensive industries. Our best estimate is that competitiveness effects—measured by the increase in net imports—are as large as 0.8% for the most energy-intensive industries and represent no more than about one-sixth of the estimated decrease in production.

Source: Journal of the Association of Environmental and Resource Economists

DOI: 10.1086/683305

Authors: Joseph E. Aldy, William A. Pizer

Institutions: National Bureau of Economic Research, Harvard University, Duke University

Language: English

Topic: Climate Change Policy and Economics

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Climate action, Decent work and economic growth, Industry, innovation and infrastructure

Open Access status: green

Funder: Resources for the Future