Carbon cost pass-through in industrial sectors
Preprint
Repository URI
Repository DOI
Change log
Authors
Neuhoff, K.
Ritz, R.
Abstract
To achieve the ambitions of the 2015 Paris Climate Agreement, the decarbonization of energy-intensive industrial sectors is becoming increasingly important. This paper focuses on the economics of carbon cost pass-through: the change in product prices induced by carbon pricing. We provide a theoretical framework to understand pass-through at the sectoral level and a constructive review of the empirical evidence from the EU ETS and other jurisdictions. Our analysis is structured around three key drivers: international trade, market structure, and free allowance allocation. We provide a synthesis of our key findings for policymakers and identify gaps in the literature for future research.
Description
Keywords
Carbon pricing, cost pass-through, free allocation, full carbon price internalization, international trade, market structure
Is Part Of
Publisher
Faculty of Economics, University of Cambridge