Conference Agenda

The "renewables pull effect", defined as the pull factor on industries by regions with favorable renewable energy potential, and "carbon leakage", the relocation of industries into regions with less strict climate policies, have the potential to reshape global value chains. Previous research has shown that energy intensive industries are under special pressure to relocate and that hydrogen-based industries, such as steel or chemical manufacturing, can achieve cost reductions by relocating part of the value chain. With this study, we expand the scope of the literature by investigating the susceptibility of hydrogen-based industries to the renewables pull effect and carbon leakage in a global general equilibrium model. Our model distinguishes industries based on their decarbonization pathway into electrifiable and hydrogen-based and incorporates international trade of intermediate goods as well as hydrogen. We introduce a climate policy, consisting of a CO$_2$ tax, carbon border adjustment taxes, and transfer payments, and analyze different policy scenarios to identify the two driving effects for industry relocation. The different scenarios also yield insights about the effectiveness of carbon border adjustment taxes, providing valuable knowledge for policy makers. A key feature of our model is its closed-form solution, which allows to explicitly derive the optimal carbon tax and market solutions. Future research steps will include a numerical calibration of the model, quantifying the magnitude and direction of industry relocation as well as the relative strength of the renewables pull effect and carbon leakage.