Assessing Policy Support for Emissions-Intensive and Trade-Exposed Industries

Abstract

Jurisdictions implementing emissions pricing often face concerns arising from emissions-intensive and trade exposed (EITE) industries. These industries face higher costs than counterparts in other jurisdictions without emissions pricing. There is also risk of emissions leakage, where economic activity from EITE industries in a jurisdiction with emissions pricing leaves for jurisdictions without pricing, leading to lower economic activity and no net reduction in emissions. As a result of these two concerns, jurisdictions implementing carbon pricing often implement complementary policy to mitigate the cost impacts on EITE industries. In this paper we provide an overview of the EITE definitions and support policies in place in Canada and compare those to definitions and policies in Australia, California and the European Union. We evaluate both domestic and international EITE support policies using the metrics of administrative costs, economic efficiency, emissions reduction incentive, and equity across and within sectors.