How do climate policy and emissions trading impact companies’ competitiveness?
International research suggests that the impact of climate policy and emissions trading on companies’ competitiveness has been slight at most. In many cases, no impact has been observed at all. This is revealed in a study published today, 20 August, by the Institute for Economic Research (VATT), which surveys the effects of climate policy von Finland economy and competitiveness.
VATT’s study assesses international research on the impacts of emissions trading on the competitiveness of companies. Studies show that emissions trading has not significantly impaired the competitiveness of the regulated companies compared to companies outside the emissions trading sector. According to studies conducted in Germany, France and other EU countries, emissions trading has not reduced companies’ labour input demand or revenue. The structures of these countries’ economies differ from Finland’s, however, so no firm conclusions can be drawn about the situation in Finland.
Emissions target level and emissions allowance allocation method impact companies’ competitiveness
According to the study, the competitiveness of certain sectors might be mildly affected by the low price and free allocation of emissions allowances and by laxity of emissions targets. The study found that the price of emission allowances has simply not raised the costs of regulated companies to date. In future, however, costs will probably rise since, in the third phase of emissions trading 2013–2020, the default method of allocating emissions allowances is based on auctioning instead of free allocation of emissions allowances. It is also possible that a more stringent environmental policy will bring positive effects such as, for example, increased investment in clean production technologies (cleantech).
In Finland only a few companies have had to buy emissions allowances in the first emissions trading periods
In the first emissions trading periods, emissions allowances have been traded mainly by electricity, gas and heat supply companies, which include major electricity producers and distributors. In Finnish conditions, the additional cost of emission allowances is around EUR 0.8/MWh, while the market price for electricity is around EUR 30/MWh.
Climate policy impacts on Finland’s economy and competitiveness – What can be learned from assessments? – the study was carried out as part of the implementation of the Government’s 2014 plan for analysis, assessment and research.
Government’s analysis, assessment and research activities
Inquiries: Topi Hokkanen, Assistant Researcher, Government Institute for Economic Research (VATT), tel. +358 295 519 510, and Sari Löytökorpi, Project Manager (Government’s Analysis, Assessment and Research Activities), Prime Minister’s Office, tel. +358 295 160 187
(24.8.2015 The second paragraph of the press release has been modified)