Conciliating industrial competitiveness and climate policy: Output-Based allocation of CO2 allowances or border adjustment? [Concilier compétitivité industrielle et politique climatique Faut-il distribuer les quotas de CO2 en fonction de la production]

International audienceWe compare four proposals for the European Union greenhouse gas Emission Trading Scheme (ets): auctioning of allowances, distribution of allowances proportional to current output, auctioning with border adjustment, and a hybrid distribution with auctioning for power production and output-based allocation in the other sectors. We develop a partial equilibrium model of the eu 27 featuring three sectors covered by the ets: cement, steel and electricity, as well as aluminium, indirectly impacted through the electricity price. The co2 leakage rate ranges from 8% under auctioning to - 2% with the border adjustment, and varies a lot across sectors. The aggregate economic cost is the highest with output-based allocation and the lowest with the border adjustment. © Presses de Sciences Po