The EU emissions trading scheme and its competitiveness effects upon European business — results from the CGE model DART

The EU emissions trading scheme will not only affect the cost structures and competitiveness of the sectors covered directly by the trading scheme, but — through changes in energy demand and thus energy prices — will also have repercussions on the entire EU market. As Europe is closely tied to the rest of the world by international trade, it will also change the position of European business on the world markets and is likely to influence international energy prices as well.

So far, research has been mainly confined to a qualitative analysis of the EU. Few studies — mainly focussing on Kyoto trading and not the EU scheme — have tried to give quantitative results. Other EU specific studies estimate abatement costs of emission reductions and prices, but ignore international effects. Against this background, the aim of this study is to assess the range of possible implications of the trading scheme using the computable general equilibrium model DART that accounts for European and international linkages. As a result, it is possible to estimate the direct economic costs for the European business as well as the trade and competitiveness effects in a globalizing world.