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Article

Reducing the Decarbonisation Cost Burden for EU Energy-Intensive Industries

E3Modelling S.A., Panormou 70-72, PO 11523 Athens, Greece
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Energies 2021, 14(1), 236; https://doi.org/10.3390/en14010236
Received: 7 December 2020 / Revised: 28 December 2020 / Accepted: 31 December 2020 / Published: 5 January 2021
(This article belongs to the Special Issue Energy Systems Analysis and Modelling towards Decarbonisation)
Carbon leakage features prominently in the climate policy debate in economies implementing climate policies, especially in the EU. The imposition of carbon pricing impacts negatively the competitiveness of energy-intensive industries, inducing their relocation to countries with weaker environmental regulation. Unilateral climate policy may complement domestic emissions pricing with border carbon adjustment to reduce leakage and protect the competitiveness of domestic manufacturing. Here, we use an enhanced version of GEM-E3-FIT model to assess the macro-economic impacts when the EU unilaterally implements the EU Green Deal goals, leading to a leakage of 25% over 2020–2050. The size and composition, in terms of GHG and energy intensities, of the countries undertaking emission reductions matter for carbon leakage, which is significantly reduced when China joins the mitigation effort, as a result of its large market size and the high carbon intensity of its production. Chemicals and metals face the stronger risks for relocation to non-abating countries. The Border Carbon Adjustment can largely reduce leakage and the negative activity impacts on energy-intensive and trade-exposed industries of regulating countries, by shifting the emission reduction to non-abating countries through implicit changes in product prices. View Full-Text
Keywords: unilateral climate policy; GEM-E3-FIT; carbon leakage; industrial relocation; border carbon adjustment unilateral climate policy; GEM-E3-FIT; carbon leakage; industrial relocation; border carbon adjustment
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MDPI and ACS Style

Fragkos, P.; Fragkiadakis, K.; Paroussos, L. Reducing the Decarbonisation Cost Burden for EU Energy-Intensive Industries. Energies 2021, 14, 236. https://doi.org/10.3390/en14010236

AMA Style

Fragkos P, Fragkiadakis K, Paroussos L. Reducing the Decarbonisation Cost Burden for EU Energy-Intensive Industries. Energies. 2021; 14(1):236. https://doi.org/10.3390/en14010236

Chicago/Turabian Style

Fragkos, Panagiotis, Kostas Fragkiadakis, and Leonidas Paroussos. 2021. "Reducing the Decarbonisation Cost Burden for EU Energy-Intensive Industries" Energies 14, no. 1: 236. https://doi.org/10.3390/en14010236

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