The effects of electricity costs on firm re-location decisions: insights for the pollution havens hypothesis?

Panhans, M., Lavric, L. and Hanley, N. (2017) The effects of electricity costs on firm re-location decisions: insights for the pollution havens hypothesis? Environmental and Resource Economics, 68(4), pp. 893-914. (doi: 10.1007/s10640-016-0051-1)

Abstract

Electricity costs are partly driven by environmental policy choices. In this paper, the effects of variations in electricity costs—as measured by end-user electricity prices–on firm relocation decisions are investigated. Using a discrete choice model and a data base that has not previously been exploited to study this problem, we investigate the effects of variations in electricity costs on the intensive and extensive re-location decisions of European firms. We find that electricity costs play a significant role in determining relocation destinations. This effect is asymmetric between firms moving into and out of a country, and between high and low energy intensity sectors. The findings of the paper have implications for the Pollution Havens Hypothesis, since they show the extent to which the effects of climate policy on domestic electricity costs can be expected to impact on firm relocation decisions both into and out of a country.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Hanley, Professor Nicholas
• Authors: Panhans, M., Lavric, L., and Hanley, N.
• College/School: College of Medical Veterinary and Life Sciences > School of Biodiversity, One Health & Veterinary Medicine
• Journal Name: Environmental and Resource Economics
• Publisher: Springer
• ISSN: 0924-6460
• ISSN (Online): 1573-1502
• Published Online: 01 August 2016
• Copyright Holders: Copyright © 2016 The Authors
• First Published: First published in Environmental and Resource Economics 68(4): 893-914
• Publisher Policy: Reproduced under a Creative Commons License