The Competitiveness Impacts of Climate Change Mitigation Policies

Joseph E. Aldy, William A. Pizer

NBER Working Paper No. 17705
Issued in December 2011
NBER Program(s):   EEE   ITI

The pollution haven hypothesis suggests that unilateral domestic climate change mitigation policy would impose significant economic costs on carbon-intensive industries, resulting in declining output and increasing net imports. In order to evaluate this hypothesis, we undertake a two-step empirical analysis. First, we use historic energy prices as a proxy for climate change mitigation policy. We estimate how production and net imports change in response to energy prices using a 35-year panel of approximately 450 U.S. manufacturing industries. Second, we take these estimated relationships and use them to simulate the impacts of changes in energy prices resulting from a domestic climate change mitigation policy that effectively imposes a $15 per ton carbon price. We find that energy-intensive manufacturing industries are more likely to experience decreases in production and increases in net imports than less-intensive industries. Our best estimate is that competitiveness effects – measured by the increase in net imports – are as large as 0.8 percent for the most energy-intensive industries and represent no more than about one-sixth of the estimated decrease in production under a $15 per ton carbon price.

download in pdf format
   (749 K)

email paper

This paper is available as PDF (749 K) or via email.

This paper was revised on July 27, 2015

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17705

Users who downloaded this paper also downloaded these:
Aldy and Stavins w17488 Using the Market to Address Climate Change: Insights from Theory and Experience
Hassler and Krusell w17757 Economics and Climate Change: Integrated Assessment in a Multi-Region World
Aldy, Krupnick, Newell, Parry, and Pizer w15022 Designing Climate Mitigation Policy
Aldy and Stavins w17569 The Promise and Problems of Pricing Carbon: Theory and Experience
Kotchen, Boyle, and Leiserowitz w17539 Policy-Instrument Choice and Benefit Estimates for Climate-Change Policy in the United States
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us