Carbon leakage
Carbon leakage a concept to quantify an increase in
Carbon leakage may occur for a number of reasons: If the emissions policy of a country raises local costs, then another country with a more relaxed policy may have a trading advantage. If demand for these goods remains the same, production may move offshore to the cheaper country with lower standards, and global emissions will not be reduced.
If environmental policies in one country add a premium to certain fuels or commodities, then the demand may decline and their price may fall. Countries that do not place a premium on those items may then take up the demand and use the same supply, negating any benefit.
Coal, oil and alternative technologies
The issue of carbon leakage can be interpreted from the perspective of the reliance of society on coal, oil, and alternative (less polluting) technologies, e.g., biomass. This is based on the theory of nonrenewable resources.[5] The potential emissions from coal, oil and gas is limited by the supply of these nonrenewable resources. To a first approximation, the total emissions from oil and gas is fixed,[clarification needed] and the total load of carbon in the atmosphere is primarily determined by coal usage.
A policy that sets a carbon tax only in developed countries might lead to leakage of emissions to developing countries. However, a negative leakage (i.e., leakage having the effect of reducing emissions) could also occur due to a lowering in demand and price for oil and gas. One of the negative effects of carbon leakage is the undermining of global emissions reduction efforts. When industries relocate to countries with lower emission standards, it can lead to increased greenhouse gas emissions in those countries.
This might lead coal-rich countries to use less coal and more oil and gas, thus lowering their emissions.[5] While this is of short-term benefit, it reduces the insurance provided by limiting the consumption of oil and gas. The insurance is against the possibility of delayed arrival of backstop technologies. If the arrival of alternative technologies is delayed, the replacement of coal by oil and gas might have no long-term benefit. If the alternative technology arrives earlier, then the issue of substitution becomes unimportant. In terms of climate policy, the issue of substitution means that long-term leakage needs to be considered, and not just short-term leakage.[5]By taking into account the potential delays in alternative technologies and wider substitution effects, policymakers can develop strategies that minimize leakage and promote sustainable emissions reduction.
Current schemes
Estimates of leakage rates for action under the
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[7]
See also
- Carbon Border Adjustment Mechanism
- Carbon footprint
- Carbon shifting
- Carbon tax
- Embedded emissions
- Emissions trading
- Indirect land use change impacts of biofuels
- Leakage (economics)
References
- ^ Andrés Cala (18 November 2014), "Emissions Loophole Stays Open in E.U.", The New York Times, retrieved 1 April 2015
- ISSN 1556-5068.
- ^ IPCC (2007), B. Metz; et al. (eds.), Glossary A-D. In (section): Annex I. In (book): Climate Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (PDF), Cambridge University Press, Cambridge, U.K., and New York, N.Y., U.S.A., archived from the original (PDF) on 2018-08-20, retrieved 2010-04-18
- ^ Barker, T.; et al. (2007), B. Metz; et al. (eds.), 11.7.2 Carbon leakage. In (book chapter): Mitigation from a cross-sectoral perspective. In (book): Climate Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, Print version: Cambridge University Press, Cambridge, U.K., and New York, N.Y., U.S.A.. This version: IPCC website, archived from the original on 2010-05-03, retrieved 2010-04-05
- ^ ISBN 978-0-521-56854-8.
- ^ Barker, T.; et al. (2007), B. Metz; et al. (eds.), Executive Summary. In (book chapter): Mitigation from a cross-sectoral perspective. In (book): Climate Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, Print version: Cambridge University Press, Cambridge, U.K., and New York, N.Y., U.S.A.. This version: IPCC website, archived from the original on 2010-03-31, retrieved 2010-04-05
- ^ "RGGI Imports and Emissions Leakage Working Group" (PDF). Archived from the original (PDF) on 2007-11-28. Retrieved 2007-11-20.
Further reading
- Markandya, A.; et al. (2001). "7.4.3 Valuation of Spillover Costs and Benefits. In (book chapter): 7. Costing Methodologies. In: Climate Change 2001: Mitigation. Contribution of Working Group III to the Third Assessment Report of the Intergovernmental Panel on Climate Change (B. Metz et al. Eds.)". Print version: Cambridge University Press, Cambridge, U.K., and New York, N.Y., U.S.A.. This version: GRID-Arendal website. Archived from the original on 2009-08-05. Retrieved 2010-05-12.
- Reinaud, J. (October 2008). "Issues behind Competitiveness and Carbon Leakage- Focus on Heavy Industry. IEA information paper". International Energy Agency (IEA), Head of Communication and Information Office, 9 rue de la Fédération, 75739 Paris Cedex 15, France. p. 122. Archived from the original on 2010-06-15. Retrieved 2010-05-12.
- Reinaud, J. (October 2008). "Climate Policy and Carbon Leakage- Impacts of the European Emissions Trading Scheme on Aluminium. IEA information paper". International Energy Agency (IEA), Head of Communication and Information Office, 9 rue de la Fédération, 75739 Paris Cedex 15, France. p. 45. Archived from the original on 2010-06-15. Retrieved 2010-05-12.