Empirical evidence and projections of carbon leakage: Some, but not too much, probably

Book/Chapter
Empirical evidence and projections of carbon leakage: Some, but not too much, probably
J. Caron (2022)
Handbook on Trade Policy and Climate Change, J. Caron, contributor; Michael Jakob, Mercator Research Institute on Global Commons and Climate Change (MCC) and Ecologic Institute, editor

Abstract/Summary:

A chapter by Justin Caron appears in Handbook on Trade Policy and Climate Change edited by Michael Jacob, Edward Elgar Publishing Ltd (2022). 

Abstract: The potential for policy-driven emissions reductions to “leak” to less regulated regions is a well-researched topic in climate change economics, though no clear conclusion regarding the likely magnitude of the problem has yet to emerge from the literature.

This chapter offers a broad overview of carbon leakage estimates, combining insights from various methodologies that existing meta-studies have so far reviewed separately: “simulation” studies providing ex-ante projections from complex economic models, and “estimation” studies that econometrically tease out ex-post evidence for leakage from existing carbon pricing schemes.

Combined with additional indirect evidence that trade frictions are generally strong relative to climate policy-induced energy price differentials, I conclude that the weight of evidence points to the conclusion of “some, but not too much” leakage: while specific sectors may be severely affected, estimated economy-wide leakage rates (of 10-30% on average) do not justify using it as an argument against climate policy.

Citation:

J. Caron (2022): Empirical evidence and projections of carbon leakage: Some, but not too much, probably. Handbook on Trade Policy and Climate Change, J. Caron, contributor; Michael Jakob, Mercator Research Institute on Global Commons and Climate Change (MCC) and Ecologic Institute, editor (https://www.e-elgar.com/shop/usd/handbook-on-trade-policy-and-climate-change-9781839103230.html)
  • Book/Chapter
Empirical evidence and projections of carbon leakage: Some, but not too much, probably

J. Caron

J. Caron, contributor; Michael Jakob, Mercator Research Institute on Global Commons and Climate Change (MCC) and Ecologic Institute, editor
2021

Abstract/Summary: 

A chapter by Justin Caron appears in Handbook on Trade Policy and Climate Change edited by Michael Jacob, Edward Elgar Publishing Ltd (2022). 

Abstract: The potential for policy-driven emissions reductions to “leak” to less regulated regions is a well-researched topic in climate change economics, though no clear conclusion regarding the likely magnitude of the problem has yet to emerge from the literature.

This chapter offers a broad overview of carbon leakage estimates, combining insights from various methodologies that existing meta-studies have so far reviewed separately: “simulation” studies providing ex-ante projections from complex economic models, and “estimation” studies that econometrically tease out ex-post evidence for leakage from existing carbon pricing schemes.

Combined with additional indirect evidence that trade frictions are generally strong relative to climate policy-induced energy price differentials, I conclude that the weight of evidence points to the conclusion of “some, but not too much” leakage: while specific sectors may be severely affected, estimated economy-wide leakage rates (of 10-30% on average) do not justify using it as an argument against climate policy.

Posted to public: 

Friday, June 24, 2022 - 14:16