Introducing the Porter Hypothesis when Analyzing Carbon Leakage through International Trade for a Small Open Economy
Author
Thomsen, Simon Fløj
Term
4. term
Education
Publication year
2023
Pages
129
Abstract
This thesis examines how incorporating the Porter Hypothesis changes the interpretation and measurement of carbon leakage through international trade for a small open economy such as Denmark. The Porter Hypothesis posits that environmental regulation can improve firms’ competitiveness via technological progress. The study first reviews the empirical literature to assess whether these mechanisms warrant inclusion in leakage calculations. It then develops a two-area ecological stock–flow–consistent macro model covering Denmark and the rest of the world, allowing for different degrees of Porter effects. The model is used to analyze a Danish environmental regulation (within a policy mix), its impact on emissions in Denmark and abroad, and the resulting leakage rates over time. Findings indicate that accounting for stronger Porter effects consistently lowers estimated leakage rates; ignoring the hypothesis introduces an upward bias that grows with the analysis horizon. The thesis concludes that the Porter Hypothesis should be incorporated into leakage assessments and policy advice for meeting Denmark’s climate goals, and it highlights potential focus areas to enhance innovation and competitiveness effects.
Denne afhandling undersøger, hvordan inddragelse af Porter-hypotesen ændrer forståelsen og beregningen af kulstoflækage gennem international handel for en lille, åben økonomi som Danmark. Porter-hypotesen peger på, at miljøregulering kan øge virksomheders konkurrenceevne via teknologisk udvikling. Først vurderes den empiriske litteratur for at afklare, om hypotesens mekanismer bør indgå i lækageberegninger. På den baggrund udvikles en to-område økologisk stock-flow-consistent makromodel, der omfatter Danmark og resten af verden og tillader forskellige grader af Porter-effekter. Modellen anvendes til at analysere en dansk miljøregulering (i et politik-mix) og dens påvirkning af emissioner i både Danmark og udlandet samt til at beregne lækagerater over tid. Resultaterne viser, at større inddragelse af Porter-hypotesens effekter systematisk sænker de beregnede lækagerater; at se bort fra hypotesen skaber en opadgående bias, som bliver større, jo længere tidshorisonten er. Konklusionen er, at Porter-hypotesen bør indarbejdes i vurderinger af kulstoflækage og i politiske anbefalinger mod de danske klimamål, og afhandlingen peger på mulige fokusområder, der kan styrke innovations- og konkurrenceeffekterne.
[This apstract has been generated with the help of AI directly from the project full text]
Keywords