Discutants : Nadine Levratto (sénior) et Simon Lang (junior)

Abstract : Defining a fair and transparent measure of carbon leakage risk is primordial to effectively tackle carbon leakage without undercutting the impact of climate policies. This paper proposes a new approach to measure the risk of carbon leakage, and applies it to the steel and cement industries. The micro-founded hypothetical monopolist test (or SSNIP) is applied at a country-product level to delineate the relevant market for each of these industries. A gravity model is used to estimate technical substitution elasticities at the product level, from which own- and cross-price elasticities are derived and used as inputs in the hypothetical monopolist test. The results from this analysis point to steel markets being delimited at the national level, while the relevant market for cement seems to include several countries, including some outside the EU for clinker.