Is the EU ETS a Just Climate Policy?

The European Union Emissions Trading System (EU ETS) is in dire straits. Prone to design problems and suffering from the effects of the economic crises the scheme is criticised for its poor achievements. In this paper we will analyse some of the features of this situation from an ethical perspective. The major part is dedicated to the complications within each phase of the EU ETS and to the recent developments it has undergone. We will briefly discuss the remedies suggested by prominent commentators. Furthermore, any policy tool to tackle climate change should be evaluated in view of the profound equity issues that are inherent to the climate problem. We will evaluate the EU ETS according to two justice-based criteria, related to effectiveness and the distribution of the duties involved in climate change, respectively. We will conclude that the EU ETS, in its current form, clearly lacks fairness on both criteria. However, the biggest problem is the unwillingness of EU leaders to mend, what could be, a commendable climate policy tool. To that extent, we argue, those leaders are acting unjustly.     

Kosovo – EU trade relations: a dynamic panel poisson approach

To inform policymaking following trade liberalization between Kosovo and the EU within the framework of the Stabilisation and Association Agreement (SAA), we specify a gravity model to investigate Kosovo’s trade in goods with 28 EU countries over the period 2005–2013. We reconcile competing methodological requirements by using a dynamic Poisson approach to estimation. Together, persistent trade patterns and an unfavourable combination of demand and supply elasticities suggest that trade liberalization in isolation is not sufficient to promote exports but may need to be incorporated within a wider policy and institutional framework. In addition, our findings suggest that trade costs should be a particular focus for policy: distance has a big negative influence on Kosovo’s exports to EU countries; while diaspora communities promote Kosovo’s exports to EU markets, most likely because they offset trade costs.     

Comparative performances of EU-15 and Turkey: a PIN analysis

Turkey started the accession process with European Union (EU) in 2005. One of the main topics of EU Turkey negotiations was the economic convergence of Turkey to EU norms. This study devises and uses Panel Index Numbers (PIN) analysis to evaluate the performance and convergence prospects of Turkish economy in the face of EU-15 economies. As evaluation areas, we have selected two main macroeconomic indicators as GDP and Export. Our results have shown that, for both indicators, Turkish economy outperforms rest of the EU-15 economies, a point that should be valuable in the process of accession.     

R&D intensity of investment across Europe before and after the crisis

In this paper we investigate the comovements between the R&D intensity of private investment and GDP growth in different European Union (EU) areas over the period 1999–2014. Our empirical analysis shows that only core countries display a common countercyclical mechanism leading to an increased intensity of R&D over prolonged downturns. The lack of an effective countercyclical pattern of R&D intensity over the evolution of GDP growth in periphery countries makes this area highly vulnerable to persistent recessions, with potentially harmful consequences for long‐term growth. For recent EU members the evidence of acyclicality should be evaluated in the light of the catching‐up process still at work in this area. Our analysis suggests that any successful EU innovation policy should not disregard the potential divergence in R&D performance due to the dispersion of the countercyclical properties of the investment intensity in productivity enhancing activities in the different EU areas.     

Does the EU Financing System Contribute to Shadow Economic Activity?

Financial contributions to the EU budget depend basically on official GDP. This means that countries with higher shadow economic activity contribute less than they should contribute in a system based on actual GDP and therefore could reduce their incentive to fight against such activities. In this paper we investigate if the EU financing system really has an influence on the intensity with which governments in EU member states fight against shadow economic activity. We find that the EU net contributors significantly fight more intensively against shadow economic activity while EU net receivers fight less. As a result, shadow economic activity is higher in net receiver and lower in net contributor countries than it were in comparison with a scenario of nationally balanced EU funding. Quantitatively and averaged over the time period 2001–2007, the diagnosed effect amounts to a stimulation of hidden economic activity by almost 10% for particular economies.     

Principles for a European Union''s Public Debt

The EU has neither the power to tax nor the right to run a public debt. We analyze if the EU should receive the right for public indebtedness. We make use of the normative theory of public indebtedness and of positive political economy analysis. Our normative analysis identified specific cases for an appropriate use of public indebtedness. According to the political economy analysis, a misuse of public debt may be possible. As the implementation of strict constitutional constraints can limit this misuse, we propose the assignment of a right to public borrowing to the EU within tight constitutional restrictions.     

Attitudes about EU expansion and zero‐sum thinking

EU expansion can be seen as a positive‐sum process benefiting all countries by creating larger markets that stimulate more productive economies through increased specialization and economies of scale, implying that the general public in all countries should favour expansion. Contrarily, expansion can be perceived as zero‐sum. Capital and production relocate from higher to lower wage regions while labour does the opposite, possibly raising unemployment and reducing wages in the higher wage regions. The general public in these countries may come to oppose EU expansion attributing any deterioration in their work situation to the gains of new citizens of the European Union. Analysis of changes in Irish attitudes towards EU expansion in 2002, 2007 and 2009 finds no evidence of a link from lowered economic conditions to increased opposition to EU expansion. The only evidence for zero‐sum thinking is that diminished economic circumstances are associated with increased opposition to immigration, but this is not associated with increased opposition to further EU expansion.     

International Management Strategies for a Straddling Fish Stock: A Bio-Economic Simulation Model of the Norwegian Spring-Spawning Herring Fishery

In this paper, a three-country dynamic bio-economic simulation model is presented for the spring-spawning herring fishery. The international spring-spawning herring fishery, based on potentially one of the most valuable fish stocks in the world, is currently recovering from a severe depletion of the stock and subsequent harvesting moratorium. Management of the herring fishery is complicated by its multi-nation exploitation, due to the highly migratory behaviour of the species moving between several coastal state zones (exclusive economic zones, EEZs) and the high seas (Ocean Loop). Based on extensive work invested on analysing both the biology of the herring stock and the fisheries economics around its exploitation we study here the profiles of different multi-agent management schemes, simulating catch levels, stock size and profit potentials of alternative management strategies. The stock dynamics are described by a linear discrete-time age-structured population model and the economics are presented by a rent maximising model with constant price of herring catch and different costs of harvesting and efficiency levels for the different national fleets. The simulations, carried out over several decades, show that the benefits of international co-operation far exceed the returns of a competitive open access fishery.JEL Classifications: C7, C15, Q22     

欧盟反倾销政策特征及涉案企业战略行为分析

在分析欧盟反倾销政策的基础上,建立一个两阶段动态竞争模型,对进口国和出口国企业在反倾销博弈中的战略行为及其动机进行了分析。在此分析基础上可得,当中国企业遭遇欧盟反倾销措施时,需要在调查期间减少出口量．欧盟企业在反倾销税的影响下为追求利润最大化会改变产出,中国企业应关注欧盟企业的战略行为以对抗其反倾销措施,为中国企业应对欧盟反倾销措施提出了对策建议。     

The effectiveness of anti-leakage policies in the European Union: results for Austria

With the third trading period of the EU emissions trading scheme (EU ETS) starting in 2013, the system of allocating emission allowances will significantly change: In contrast to the previous two trading periods, auctioning of the allowances should now be the rule rather than the exception. Accompanying this policy change, concerns over competitiveness of energy intensive, trade exposed sectors as well as over limited environmental effectiveness via the channel of carbon leakage, have regained prominence. In this paper, we thus explore the impacts of potential EU policies to counter losses in international competitiveness and carbon leakage from the perspective of Austria. Based on numerical simulations with a computable general equilibrium model, we evaluate three policy options: an input subsidy for carbon allowances (thus reflecting the planned partially free allocation mechanism in the third EU ETS phase), a subsidy for domestic production, and an export rebate based on sectoral CO₂ costs. Our results show that each policy has the potential to support domestic production in exposed sectors relative to a full auctioning scenario and thus increase competitiveness. However, none is imperatively effective at reducing Austria’s net carbon emissions: while the carbon trade balance is improved and hence leakage declines, the tradability of emission permits within the EU ETS allows CO₂ emissions from Austria’s ETS output to increase. A cost benefit analysis indicates that the two policies promoting domestic output and exports are more cost effective than the CO₂ input subsidy.     

Tax competition and tax structure in open federal economies: Evidence from OECD countries with implications for the European Union

Tax competition arguments suggest that governments that operate in an open economy (such as local governments) should not and will not rely on non-benefit taxes, such as the income tax. Yet we observe reliance on income taxes by local governments in many countries, and such reliance changes over time. Evidence from a panel data set of 13 OECD countries over the period 1975-1984 suggests that competition between levels of government (resulting in a vertical fiscal externality) and between governments at the same level (resulting in a horizontal fiscal externality) provide some economic rationale for these changes. Moreover, the evidence indicates that the vertical and horizontal fiscal externalities interact. These results have some interesting implications for fiscal policy in the European Union, particularly as the EU continues to evolve. One implication for the EU is that enlargement that increases tax base disparities within the EU (and is not accompanied by an EU-level income tax) will tend to lower national income tax rates, although this must be qualified because it also depends on the mobility of the population. A second implication is that fiscal expansion of the EU to include an EU-level income tax may tend to lower the reliance of national governments on income taxes through the vertical externality, but may also tend to equalize tax bases across countries, and so increase reliance on national income taxes through the horizontal externality.     

Principles of Policymaking in the European Union: An Economic Perspective

How should tasks be divided between the EU and its member states?And what institutional reforms are needed? This paper arguesthat the single market remains to be better enforced, and thismight require further centralisation of tasks. On the otherhand, EU meddling with redistribution should be scaled back;this would imply reducing EU intervention in agricultural policy,structural funds and the social charter. EU tasks should insteadbe expanded outside the first pillar, namely in foreign anddefence policies, internal security, immigration. The paperends by discussing what institutional reforms are needed toaccompany this allocation of tasks. (JEL F02, F3)     

Higher Price,Lower Costs? Minimum Prices in the EU Emissions Trading Scheme

In this paper, we examine the introduction of a price floor in an emissions trading system (ETS) when some emissions are regulated outside the ETS. We theoretically characterize the conditions under which a price floor enhances welfare. Using a numerical simulation model of the European Union (EU), we find that moderate minimum prices in the EU ETS can reduce the costs of EU climate policy by up to 30 percent. We also find that, because of tax‐interaction effects, the optimal minimum price in the EU ETS should be about four times higher than the average marginal abatement cost in non‐ETS sectors.     

Russian Business Interests and the Enlarged European Union

The European Union is Russia's most important partner in foreign economic activities. With its eastward enlargement in 2004 the European Union has—not only in geographical terms—moved even closer to Russia. It should be expected that strong economic ties cause Russian business interests to influence related matters of foreign policy. This study therefore starts by identifying Russian business interests vis-a-vis the EU. Apart from those businesses already heavily involved in transactions with the EU, businesses with ambitious plans for future engagement and businesses which face heavy competition from EU companies are also included. In a second step these business interests are then analysed in detail. The specific interests of Russian companies are depicted to establish the points of conflict with EU positions. The article then describes how Russian companies lobby their government in order to gain support and how the Russian government reacts. The result is a more detailed assessment of the role of Russian business in Russia's policy towards the EU.     

Abuse of EU Emissions Trading for Tacit Collusion

In this paper, we show that loopholes in EU emissions trading law foster tacit collusion that impacts oligopolistic product markets. The abuses originate from the covert misuse of EU emissions trading institutions, such as pooling or project-based mechanisms. We analyse two types of these loopholes by means of game theoretical methods to show how oligopolistic firms establish output restrictions, even if those firms are price takers on the~permit market (which might actually be the case for the majority of obligated firms in the EU). The identified misuse of emissions trading law increases firms’ profits, decreases the consumers’ surplus and has negative effects on social welfare for specified parameter ranges. Consequently, public authorities should not allow emissions trading’s overall good reputation—based upon its efficient abatement of pollution—to blind them to options in European emissions trading legislation that would eventually restrict competition.      

欧盟研发框架计划项目的组织与管理

欧盟研发框架计划是欧盟主体科技计划。为提高科技资金的使用效率和科技质量,欧委会对项目制订了严格的组织管理办法。欧盟研发框架计划所有项目均实施合同管理,负责计划实施的机构与项目主持单位和个人签订资助协议,其内容涉及项目期限、资金拨付、报告制度以及相关法律等内容,还涉及费用、资金转移、成果使用和获取、成果扩散及产业化等条款。借鉴欧盟研发框架计划项目的管理制度和管理经验,我国在加强科技项目管理方面,应实行规范的合同管理,实施严格的报告制度,充分发挥项目主持人的作用。     

The effects and policy implications of state aids to industry: an economic analysis

The use of state aids to industry is a poorly understood part of competition policy. Currently, the EU Commission presumes that state aids distort competition, yet it approves 98% of applications, often for social or distributional reasons. We argue that proper regulation of state aids should focus on two issues, the externalities generated and the inefficiencies arising from failures in competition between governments. We thus develop a new framework for EU policy and compare its implications with the existing practice of the EU Commission.     

Do Subjects Separate (or Are They Sophisticated)?

In many experiments, particularly individual choice experiments, experimenters ask many questions to the subjects and use the random lottery incentive mechanism to give an incentive to the subjects. That is, the experimenter, at the end of the experiment, picks just one of the questions, plays out that question, and pays the subject on the basis of this one question. The idea is that subjects should separate the various questions and reply to each as if it were a separate question—in isolation from all the other questions in the experiment. This procedure is methodologically sound if the subjects behave in accordance with Expected Utility (EU) theory, since this theory says that the best procedure for the subjects is to separate the various questions. However, if there is any doubt as to whether the subjects obey EU theory, and particularly if the experiment is designed to test whether the behaviour of the subjects is in accordance with EU, this incentive mechanism is open to criticism. Indeed many referees use this argument against the research. The response that the subjects may not respect EU, yet still separate the various questions, is obviously open to objection and generally it is not clear whether this response is valid or not. There have been two direct tests of this separation hypothesis (by Starmer and Sugden (1991) and by Cubitt et al. (1998), which suggest that it is valid, but further evidence is required. This paper provides a further, stronger, test of this hypothesis: we confront the two stories—(1) that the subjects answer the various questions separately, and (2) that the subjects respond to the experiment as a whole—using experimental data from an experiment in which the random lottery incentive mechanism was used. Our analysis shows that it would appear that subjects do answer as if they were separating the questions. This should be considered reassuring for those experimenters who use the random lottery incentive mechanism.     

Which commercial partners are important for the most recently admitted EU countries?

This paper describes the degree of trade integration inside the European Union (EU) after the fifth enlargement in 2004. To achieve this goal, we build a database of information on trade flows between the new EU countries (EU‐10) and 180 commercial partners in six different sectors from 1999 to 2011. Using the standard gravity model and estimating a difference‐in‐differences specification, we analyze how joining the EU affected the intensity and direction of the EU‐10's trade flows. Our results show that though trade exchanges between the EU‐10 and EU‐15 intensified after 2004, the impact of integration was much more significant to the EU‐10 group.     

Rethinking the allocation of macroprudential mandates within the Banking Union – a perspective from east of the BU

This paper argues that reforms of the Banking Union should be aimed at increasing efficiency of the single market as well enhance financial stability in the European Union. We argue that this can only be achieved if the Banking Union becomes more accommodative to non-Eurozone Central and Eastern European countries. It can be achieved if within BU institutions, the allocation of competencies reflects the subsidiary demands of CEE governments. Using the example of macroprudential regulation, we develop a number of reform options that could result in the better functioning of the Single Supervisory Mechanism and thus benefit all EU member states.