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Technological Progress and Carbon Price Formation: an Analysis of EU-ETS Plants

Author

Listed:
  • Marc Baudry

    (EconomiX (Université Paris Nanterre))

  • Anouk Faure

    (EconomiX (Université Paris Nanterre) & Chaire Economie du Climat (PSL))

Abstract
This study investigates the nature of technological progress in six manufacturing industries covered under the EU-ETS, plus the power sector, and its effect on carbon price formation using marginal abatement cost curves. We adopt a technological frontier framework that we calibrate to input and output data at the plant level from 2013 to 2017, with a directional distance function approach. Our results reveal that most of the time, technological progress resulted in inflating baseline emissions, despite decreasing the carbon intensity of production. In our sample industries, technological progress therefore leads to increase abatement efforts, raising the equilibrium price of carbon.

Suggested Citation

  • Marc Baudry & Anouk Faure, 2021. "Technological Progress and Carbon Price Formation: an Analysis of EU-ETS Plants," Working Papers 2021.10, FAERE - French Association of Environmental and Resource Economists.
    • Handle: RePEc:fae:wpaper:2021.10
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    References listed on IDEAS

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    Cited by:

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    2. Aliénor Cameron & Marc Baudry, 2023. "The case for carbon leakage and border adjustments: where do economists stand?," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 25(3), pages 435-469, July.

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    More about this item

    Keywords

    SEQE; Changement Technologique; Production; Analyse Empirique;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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