International competitiveness and leakage: A case study of the European steel industry

This study develops and applies an analytical framework for examining the determinants of carbon leakage and competitiveness. The study has a long-term perspective and focuses on the European steel industry. For the case study, a CGE model is used to develop feasible scenarios of the evolution of competitiveness of the European steel industry and carbon leakage for alternative instrument mixes and alternative levels of global participation in climate change policies. The study finds that without any safeguards to the industry, and in the event of moderate climate ambitions in the rest of the world, an ambitious climate policy in Europe could lead to a significant loss of competitiveness of the steel sector and a high and increasing rate of carbon leakage.