An EU carbon price as high as €65 would have barely any impact on Europe’s trade balance and should not be a reason to dictate climate policy, a study found on Monday.

• A ten-fold increase in current EUA prices to €65 would equate to a 30% increase in energy prices, and would cause exports to fall by 0.5% while increasing imports by 0.07%, according to a study by the UK’s Grantham Research Institute and the London School of Economics’ ESRC Centre for Climate Change Economics and Policy.
• The evidence could ease pressure on EU lawmakers to agree stronger reforms to the EU ETS, as carbon leakage concerns are frequently cited by industry groups as reasons to be cautious.
• Concerns about carbon leakage and the competitiveness of European industry are not entirely unfounded, but evidence suggests they have been overstated. Even heavy, energy-intensive industries are more resilient to high energy prices than has been suggested by some companies and politicians. Policy-makers should not allow the prospect of an increase in energy and carbon prices to dictate efforts designed to cut emissions and tackle climate change,” said study co-author Antoine Dechezleprêtre in a statement to the report.

“To put things into perspective, while a 30% increase in energy costs in the EU would increase imports by less than one-tenth of a percent, imports have actually been growing at an annual rate of 15.6% since 2009. Therefore, the impact on trade of more ambitious policies to reduce greenhouse gas emissions is likely to be extremely limited,” added co-author Misato Sato.

By Ben Garside – ben@carbon-pulse.com