Environmental regulatory measures, such as emissions trading system, are popular options adopted by many nations and regions, and how they affect corporate activities and behavior as well as the international competitiveness of industries is of a vital interest to stakeholders. The paper analyzes a number of previous studies on this subject and estimates international competitiveness and carbon intensities of Japanese industries through industry and product level assessment, using the methodology adopted for the analysis of EU’s Emissions Trading Scheme (EU ETS). In addition, various options for allocating emission allowances are reviewed in terms of three trade-off factors, such as efficiency, equity and political tolerance. The paper also describes a case study on a hot rolled steel plate manufactured in Japan to determine demand function, price elasticity, substitute elasticity, and domestic and international market shares, using the statistical data on demand-supply trends and price fluctuation. The study also identifies how emissions trading system can affect demand, supply, and trade patterns of a product, and analyzes the range of carbon constraints among nations and regions, which competitor corporations in trading partner nations must face.
