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@article{Martin:2014:10.1257/aer.104.8.2482,
author = {Martin, R and Muûls, M and de, Preux LB and Wagner, UJ},
doi = {10.1257/aer.104.8.2482},
journal = {American Economic Review},
pages = {2482--2508},
title = {Industry Compensation under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme},
url = {http://dx.doi.org/10.1257/aer.104.8.2482},
volume = {104},
year = {2014}
}

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TY  - JOUR
AB  - <jats:p> When regulated firms are offered compensation to prevent them from relocating, efficiency requires that payments be distributed across firms so as to equalize marginal relocation probabilities, weighted by the damage caused by relocation. We formalize this fundamental economic logic and apply it to analyzing compensation rules proposed under the EU Emissions Trading Scheme, where emission permits are allocated free of charge to carbon-intensive and trade-exposed industries. We show that this practice results in substantial overcompensation for given carbon leakage risk. Efficient permit allocation reduces the aggregate risk of job loss by more than half without increasing aggregate compensation. (JEL H23, Q52, Q53, Q54, Q58) </jats:p>
AU  - Martin,R
AU  - Muûls,M
AU  - de,Preux LB
AU  - Wagner,UJ
DO  - 10.1257/aer.104.8.2482
EP  - 2508
PY  - 2014///
SN  - 0002-8282
SP  - 2482
TI  - Industry Compensation under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme
T2  - American Economic Review
UR  - http://dx.doi.org/10.1257/aer.104.8.2482
VL  - 104
ER  -

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