International carbon leakage

To mitigate climate change, countries have implemented national action plans to reduce their greenhouse gas emissions while respecting the principle of national sovereignty. However, unless action is taken to reduce emissions at the international level, this can lead to carbon leakage, i.e. further emissions caused by the relocation of production to other countries or the import of greenhouse gas-intensive goods and services.

Nº 35
some attempts made
past case
Region-1
Region-2
Region-3
Region-4
ongoing case
no attempts made

International carbon leakage

To mitigate climate change, countries have implemented national action plans to reduce their greenhouse gas emissions while respecting the principle of national sovereignty. However, unless action is taken to reduce emissions at the international level, this can lead to carbon leakage, i.e. further emissions caused by the relocation of production to other countries or the import of greenhouse gas-intensive goods and services.

The Kyoto Protocol, an international agreement to reduce greenhouse gas emissions from industrialised countries, has led to carbon leakage, as signatory countries have increased their imports of carbon-based products from non-compliant countries by about eight per cent, with the additional emission intensity of their imports amounting to three per cent.

Border adjustments on imports, carbon consumption charges, and climate excise contributions combined with emissions trading might help to avoid carbon leakage.

Carbon Leakage, consumption and state. https://doi.org/10.1146/annurev-environ-120820-053625

Aichele, R., & Felbermayr, G. (2015). Kyoto and carbon leakage: An empirical analysis of the carbon content of bilateral trade. Review of Economics and Statistics, 97(1), 104-115. https://doi.org/10.1162/REST_a_00438

Grubb, M., Jordan, N. D., Hertwich, E., Neuhoff, K., Das, K., Bandyopadhyay, K. R., … & Oh, H. (2022). Carbon leakage, consumption, and trade. Annual Review of Environment and Resources, 47, 753-795. https://doi.org/10.1146/annurev-environ-120820-053625

Babiker, M. H. (2005). Climate change policy, market structure, and carbon leakage. Journal of international Economics, 65(2), 421-445. https://doi.org/10.1016/j.jinteco.2004.01.003