Title page
Contents
Abstract/Résumé 4
1. Introduction 7
2. Data and descriptive evidence for steel, cement and aluminium 10
Plant-level output and emissions data 10
Plant-level carbon prices 12
Carbon price asymmetries among trading partners 15
3. Empirical evidence for steel and cement 20
The plant-level effects of carbon pricing on emissions 20
Carbon leakage through international trade 24
Carbon leakage rates 27
Sources of emission reductions and carbon leakage 29
4. Conclusions 30
References 31
Annex A. Climate Trace 36
Annex B. Carbon pricing data 39
Carbon pricing databases 39
Carbon price modelling details 40
Sources of variation 42
Carbon prices in the electricity sector 43
Annex C. Plant-level data and empirical evidence 45
Annex D. Country-level data and empirical evidence 49
Table 1. Summary statistics of plant-level carbon prices 14
Table 2. Carbon pricing characteristics of regulated plants 15
Table 3. Average differences in carbon prices among trading partners increased over 2015-21 20
Table 4. The plant-level effect of carbon pricing on domestic emissions 23
Table 5. As carbon price differences among trading partner rise, imported emissions increase 26
Table 6. Results are robust to a range of control variables 26
Table 7. Carbon leakage rates 28
Table 8. Drivers of emission reductions and carbon leakage 29
Figure 1. Plants covered by the dataset cover the entire world 11
Figure 2. Cement plants are most numerous, followed by steel, and most are located in China 12
Figure 3. The dataset covers a significant share of global production and GHG emissions 12
Figure 4. Carbon prices of heavy industries differ from other industrial subsectors 17
Figure 5. Domestic carbon prices differ from carbon prices in imports and export markets 19
Figure 6. Emissions from plants facing no carbon prices increased whereas they remained stable for plants facing carbon prices 21
Annex Tables
Table A A.1. Production technologies and their GHG emission intensity 36
Table A B.1. Carbon prices and design feature differ across schemes, 2015-2021 40
Table A B.2. Carbon pricing schemes not modelled 41
Table A C.1. Descriptive statistics of plant-level emissions, carbon pricing and control variables 45
Table A C.2. The effect of carbon pricing on emissions controlling for CAPMF 46
Table A C.3. The effect of carbon pricing on emissions (year-level results) 47
Table A C.4. The effect of carbon pricing on production volumes 47
Table A D.1. Summary statistics 49
Table A D.2. Main table using OLS with logged dependent variables 49
Table A D.3. The quantity and value of imports increases with carbon price differences 50
Annex Figures
Figure A A.1. Share of plants, production and emissions observed by satellite 38
Figure A B.1. In most countries heavy industries face the same carbon price as the electricity sector 44
Figure A C.1. Interquartile range in carbon price 45