Forms and Channels of Carbon Leakage

This paper structures and summarises some of the debates around carbon leakage: Carbon leakage as a problem for the effectiveness of unilateral (or non-harmonised) climate policy, for its economic efficiency in terms of reducing emissions at least cost, for the competitiveness of businesses, and as a possible contradiction for the emerging discussion on radical innovations and industrial restructuring towards a low-carbon economy. A second part of this paper discusses the different channels through which carbon leakage may occur. This includes production (or operational) leakage, investment leakage, leakage transmitted through resource markets and finally indirect leakage.