Competitiveness and Linking of Emission Trading Systems

The linking of emission trading systems (ETS) can be a powerful means to address competitiveness concerns of industries that fall under an ETS. This is the outcome of a recently published study that adelphi conducted on behalf of the German Federal Environment Agency (UBA). Competitiveness concerns and carbon leakage as a result of carbon regulation, particularly the introduction of an ETS, have been widely discussed in theory and practice. Against this background, the study assesses competitiveness exposure of industrial sectors and presents policy measures that aim at minimizing potential negative effects of carbon pricing on the competitiveness of domestic industries. The authors Tobias Hausotter, Sibyl Steuwer and Dennis Tänzler also provide a comparison of different existing approaches to competitiveness concerns proposed by emission trading systems and give an outlook on the role of linking of these schemes as a solution to this debate.