Carbon Leakage - Current Schemes

Current Schemes

Barker et al. (2007) assessed the literature on spillover effects and carbon leakage. They defined carbon leakage as the increase in CO₂ emissions outside of the countries taking domestic mitigation action, divided by the reduction in emissions of countries taking domestic mitigation action. Accordingly, a leakage rate greater than 100% would mean that domestic actions to reduce emissions had had the effect of increasing emissions in other countries to a greater extent, i.e., domestic mitigation action had actually led to an increase in global emissions.

Estimates of leakage rates for action under the Kyoto Protocol ranged from 5 to 20% as a result of a loss in price competitiveness, but these leakage rates were viewed as being very uncertain. For energy-intensive industries, the beneficial effects of Annex I actions through technological development were viewed as possibly being substantial. This beneficial effect, however, had not been reliably quantified. On the empirical evidence they assessed, Barker et al. (2007) concluded that the competitive losses of then-current mitigation actions, e.g., the EU ETS, were not significant.

Recent North American emissions schemes such as the Regional Greenhouse Gas Initiative and the Western Climate Initiative are looking at ways of measuring and equalising the price of energy 'imports' that enter their trading region