Industry Compensation under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme
When regulated firms are offered compensation to prevent them from relocating, efficiency requires that payments be distributed across firms so as to equalize marginal relocation probabilities, weighted by the damage caused by relocation. We formalize this fundamental economic logic and apply it to...
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| Veröffentlicht in: | The American economic review 2014-08, Vol.104 (8), p.2482-2508 |
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| container_end_page | 2508 |
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| container_title | The American economic review |
| container_volume | 104 |
| creator | Martin, Ralf Muûls, Mirabelle de Preux, Laure B. Wagner, Ulrich J. |
| description | When regulated firms are offered compensation to prevent them from relocating, efficiency requires that payments be distributed across firms so as to equalize marginal relocation probabilities, weighted by the damage caused by relocation. We formalize this fundamental economic logic and apply it to analyzing compensation rules proposed under the EU Emissions Trading Scheme, where emission permits are allocated free of charge to carbon-intensive and trade-exposed industries. We show that this practice results in substantial overcompensation for given carbon leakage risk. Efficient permit allocation reduces the aggregate risk of job loss by more than half without increasing aggregate compensation. |
| doi_str_mv | 10.1257/aer.104.8.2482 |
| format | Article |
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| fulltext | fulltext |
| identifier | ISSN: 0002-8282 |
| ispartof | The American economic review, 2014-08, Vol.104 (8), p.2482-2508 |
| issn | 0002-8282 1944-7981 |
| language | eng |
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| source | Business Source Complete; JSTOR Archive Collection A-Z Listing; American Economic Association Web |
| subjects | Benchmarking Carbon Carbon dioxide emissions Carbon pricing Carbon trading Climate change Climate change policy Climate policy College campuses Compensation Compliance Costs Economic theory Emissions trading Employment Energy economics Environmental policy Incentives Industrial efficiency Industrial plant emissions Industrial regulation Investment analysis Location of industry Permits Personal finance Pollutant emissions Pollution control Probability theory Regulated industries Regulation Relocation Risk management Studies Western Europe |
| title | Industry Compensation under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme |
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