Impacts of the EU Emissions Trading Scheme on the industrial competitiveness in Germany

The report identifies a small number of German industrial sectors—specifically basic iron and steel, fertilizers and nitrogen compounds, aluminium and aluminium products, paper and paperboard, and other basic inorganic chemicals—that face both high carbon-related costs and high international trade intensity. It argues that these sectors are most susceptible to competitiveness distortions and carbon leakage. The analysis distinguishes between direct costs (emissions from production) and indirect costs (increased electricity prices), noting that for some sectors, indirect costs are the primary burden. The document also evaluates various policy mechanisms to mitigate these effects, such as free allocation of allowances, border tax adjustments, and sectoral agreements.

• For most German industrial sectors covered by the EU ETS, the maximum gross value added (GVA) at stake is below 2%.
• Five German sectors are identified as being exposed to both high trade intensity and high maximum value at stake (above a 10% threshold): basic iron and steel, fertilizers and nitrogen compounds, aluminium and aluminium products, paper and paperboard, and other basic inorganic chemicals.
• The report notes that the UK generally exhibits higher trade intensity with non-EU countries compared to Germany, though both share several exposed sectors such as lime, cement, and basic iron and steel.
• Empirical estimates for the impact of emissions trading on production costs vary widely by sector; for example, cement production in Germany has seen marginal cost increase estimates as high as 144%.
• Correlation analysis between CO2 prices and product prices is deemed difficult and likely to provide limited insights due to data constraints, estimation biases, and exogenous shocks.
• Free allocation of allowances for direct emissions does not address indirect costs from electricity prices and may not prevent carbon leakage if plants are closed but allowances are still held.
• Border tax adjustments (BTAs) are identified as a cost-efficient way to address carbon leakage by equalizing carbon costs for domestic and imported products, although they face practical implementation challenges and potential WTO/GATT compatibility issues.

APA

Graichen, V., Schumacher, K., Matthes, F. C., Mohr, L., Duscha, V., Schleich, J., & Diekmann, J. (2008). Impacts of the EU Emissions Trading Scheme on the industrial competitiveness in Germany. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2014/11/ko-institut-et-al-2008-impacts-of-the-eu-ets-on-the-industrial-competitiveness-in-germany.pdf

Chicago

Graichen, Verena, Katja Schumacher, Felix Chr. Matthes, Lennart Mohr, Vicky Duscha, Joachim Schleich, and Jochen Diekmann. Impacts of the EU Emissions Trading Scheme on the industrial competitiveness in Germany. Climate Strategies, 2008. https://climatestrategies.org/wp-content/uploads/2014/11/ko-institut-et-al-2008-impacts-of-the-eu-ets-on-the-industrial-competitiveness-in-germany.pdf.

Wikipedia

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BibTeX

@techreport{graichen2008impacts, author = {Graichen, Verena and Schumacher, Katja and Matthes, Felix Chr. and Mohr, Lennart and Duscha, Vicky and Schleich, Joachim and Diekmann, Jochen}, title = {{Impacts of the EU Emissions Trading Scheme on the industrial competitiveness in Germany}}, institution = {Climate Strategies}, year = {2008}, month = sep, url = {https://climatestrategies.org/wp-content/uploads/2014/11/ko-institut-et-al-2008-impacts-of-the-eu-ets-on-the-industrial-competitiveness-in-germany.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }