Cost pass-through in strategic oligopoly: Sectoral evidence for the EU ETS

Price adjustments, particularly the cost pass-through relationships, are at the core of the analysis on how asymmetric climate change policy initiates two channels of carbon leakage: (decreasing) market shares and profit margins. Using advanced time-series techniques, this paper explores the pass-through relationships in an oligopoly setting. Under the condition of oligopolistic competition with strategic interactions, the cost pass-through of domestic firms is restricted by strategic interactions with foreign competitors. The empirical section demonstrates that strategic pricing in the presence of the incomplete cost pass-through is by far the prevailing behaviour of German energy-intensive sectors participating in the EU Emissions Trading Scheme (ETS). The relatively low cost pass-through rates in the long-run in most sectors in our sample - in comparison to studies which do not account for strategic interactions - are consistent with earlier findings. Additional costs induced by the EU ETS are therefore likely to be absorbed through a reduction of profit margin, creating incentives to relocate business abroad. Policy implications of the results are that strategic interactions between domestic and foreign firms could be a critical factor in applying offsetting instruments to address carbon leakage domestically. Accounting for oligopolistic structures - with and without strategic interactions - should therefore be a central issue within the broader context of how market structure affects climate change policies. --cost pass-through,strategic oligopoly,emissions trading scheme

The Analysis of World Works Councils, World Union Councils and Global Trade Union Networks in a Regulatory Space Framework.

The increasing global reach of companies, accompanied by restructuring activities, lead to a greater ability of multinational companies to shift production. Hypermobility of capital is having a progressively direct effect on employees, bodies of employee representation and trade unions. Globalisation is challenging national systems of industrial relations, weakens labour’s bargaining power and encourages a ‘race to the bottom’ in wages, working conditions and management practices (Silver, 2003:4). Therefore, a global strategy is a necessary labour response to match the reach of global capital (Burgmann, 2016). This paper analyses one such response – creation of global worker bodies in multinational companies. These bodies of indirect collective employee voice take the form of World Works Councils (WWCs), World Union Councils (WUCs) and Global Trade Union networks (GUNs). They are still relatively under-researched and present a gap in the academic literature. Based on three company case studies in the metalworking sector, this paper evaluates the ability of these global worker bodies to provide meaningful employee voice. In doing so, it attempts to provide an understanding of their formation, functioning and, most importantly, outcomes for employees. This paper begins by providing a brief overview of labour strategies. Following this, it outlines the conceptual framework underpinning the study – the regulatory space. It proceeds by providing the typology of the global worker bodies with definitions suggested by the author. The methodology section, outlining the main characteristics of the three case studies, is then introduced. This is followed by a discussion of the key findings, which is divided into three sections: formation, functioning and effectiveness of the global worker bodies. When analysing effectiveness of the global worker bodies, discussion focuses on five key incidents that took place in the three case studies in Czech Republic, USA, India, Turkey and Argentina. Concluding remarks summarise the pape

Developing Supra-European Emissions Trading Schemes: An Efficiency and International Trade Analysis

Given the coexistent EU priorities concerning the competitiveness of European industries and international emissions regulation at the company level, this paper assesses the efficiency and competitiveness implications of linking the EU Emissions Trading Scheme (ETS) to emerging trading schemes outside Europe. Currently, countries like Canada, Japan or Australia are contemplating the set up of domestic ETS with the intention of linking up to the European scheme. While a stylized partial-market analysis suggests that the integration of trading systems is always beneficial in efficiency terms, our applied general equilibrium approach shows that the aggregate welfare impacts of linking the EU ETS are rather limited. We further find that the trade-based competitiveness effects of linking the European ETS crucially depend on the linked trading system: Although EU economy-wide competitiveness varies only moderately across linking scenarios, the sectoral decomposition of these aggregate effects shows that European industries are much more sensitive to the linking constellation. Similarly, the incentives for non-EU regions to join the European system display considerable heterogeneity. A stricter allowance allocation within domestic ETS can, however, substantially improve the overall prospects for establishing supra-European emissions trading schemes. --Emissions Trading,EU ETS,Linking,Competitiveness,CGE model

Unilateral climate policy and competitiveness: The implications of differential emission pricing

Unilateral emission reduction commitments raise concerns on international competitiveness and emission leakage that result in preferential regulatory treatment of domestic energy-intensive and trade-exposed industries. Our analysis illustrates the potential pitfalls of climate policy design which narrowly focuses on competitiveness concerns about energy-intensive and trade-exposed (EITE) branches. The sector-specific gains of preferential regulation in favour of these branches must be traded off against the additional burden imposed on other industries. Beyond burden shifting between industries, differential emission pricing bears the risk for substantial excess cost in emission reduction as policy concedes (too) low carbon prices to EITE industries and thereby foregoes relatively cheap abatement options in these sectors. From the perspective of global cost-effectiveness we find that differential emission pricing of EITE industries hardly reduces emission leakage since the latter is driven through robust international energy market responses to emission constraints. As a consequence the scope for efficiency compared to uniform pricing is very limited. Only towards stringent emission reduction targets will a moderate price differentiation achieve sufficient gains from leakage reduction to offset the losses of diverging marginal abatement cost.unilateral climate policy design, leakage, competitiveness

A mathematical model of metabolism and regulation provides a systems-level view of how Escherichia coli responds to oxygen

The efficient redesign of bacteria for biotechnological purposes, such as biofuel production, waste disposal or specific biocatalytic functions, requires a quantitative systems-level understanding of energy supply, carbon, and redox metabolism. The measurement of transcript levels, metabolite concentrations and metabolic fluxes per se gives an incomplete picture. An appreciation of the interdependencies between the different measurement values is essential for systems-level understanding. Mathematical modeling has the potential to provide a coherent and quantitative description of the interplay between gene expression, metabolite concentrations, and metabolic fluxes. Escherichia coli undergoes major adaptations in central metabolism when the availability of oxygen changes. Thus, an integrated description of the oxygen response provides a benchmark of our understanding of carbon, energy, and redox metabolism. We present the first comprehensive model of the central metabolism of E. coli that describes steady-state metabolism at different levels of oxygen availability. Variables of the model are metabolite concentrations, gene expression levels, transcription factor activities, metabolic fluxes, and biomass concentration. We analyze the model with respect to the production capabilities of central metabolism of E. coli. In particular, we predict how precursor and biomass concentration are affected by product formation