This paper finds that it is optimal to start a long-term emission-reduction strategy with significant short-term abatement investment, even if the optimal carbon price starts low and grows progressively over time. Moreover, optimal marginal abatement investment costs differ across sectors of the...

This paper explores the idea that a properly designed sectoral approach could be the answer to two sets of constraints that hinder international agreements on climate change, namely a genuine concern from developing countries for economic growth and competitiveness issues from industrialized...

Demand uncertainty is thought to in uence irreversible capacity decisions. Suppose local demand can be sourced from domestic (rigid) production or from (fl exible) imports. This paper shows that the optimal domestic capacity is either increasing or decreasing with demand uncertainty depending on...

For carbon-intensive, internationally-traded industrial goods, a unilateral increase in the domestic CO2 price may result in the reduction of the domestic production but an increase of imports. In such sectors as electricity, cement and steel, the trade flows result more from short-term regional...

For carbon-intensive, internationally-traded industrial goods, a unilateral increase in the domestic CO2 price may result in the reduction of the domestic production but an increase of imports. In such sectors as electricity, cement and steel, the trade flows result more from short-term regional...

Competitiveness and carbon leakage are major concerns for the design of CO2 emissions permits markets. In absence of a global carbon tax and of border carbon adjustments, output based allocation is a third best solution and is actually implemented (Australia, California, New Zealand). The EU has...

Competitiveness and carbon leakage are major concerns for the design of CO2 emissions permits markets. In the absence of a global carbon tax and of border carbon adjustments, output-based allocation is a third-best solution and is actually implemented (Australia, California, New Zealand). The EU...

This paper explores the idea that a properly designed sectoral approach could be the answer to two sets of constraints that hinder international agreements on climate change, namely a genuine concern from developing countries for economic growth and competitiveness issues from industrialized...

In industries with large sunk costs, the investment strategy of firms depends on the regulatory context. We consider ex-ante industrial policies in which the sunk cost may be either taxed or subsidized, and antitrust policies which could either be pro-competitive (leading to divestiture in case...