Carbon leakage and the future of Old Industrial Regions after Copenhagen

The research investigates how asymmetric global climate policies can lead to carbon leakage, specifically the relocation of CO2-intensive industries like iron and steel. Using the Basque Country as a representative Old Industrial Region (OIR), the authors demonstrate that while relocation impacts may be negligible at a national level, they can significantly reduce regional GDP. The study finds that reducing emissions through industrial relocation is far more costly in terms of GDP loss than achieving the same reductions through cost-effective mitigation policies.

• Carbon leakage in the iron and steel sector is estimated to range from 1.5% to 35% of relocation, with overall industrial production leakage estimated up to 20%.
• In the Basque Country, the iron and steel industry is highly significant, accounting for 5.9% of regional GDP and nearly 50% of Spain's total steel production.
• The Basque Country's steel production is exclusively based on Electric Arc Furnace (EAF) technology, making it among the least CO2-intensive plants globally, though this limits further energy efficiency gains.
• Relocation of the iron and steel industry in the Basque Country between 1.5% and 35% results in a GDP drop of up to 2.26% and a utility loss of up to 1.62%.
• Industrial relocation causes significant indirect economic damage due to strong linkages between iron and steel and other sectors; for a 15% relocation, the broader industry sector shrinks by 2.62%.
• Reducing CO2 emissions through industrial relocation is extremely inefficient, with an implicit cost between 187 €/tCO2 and 202 €/tCO2.
• A cost-effective mitigation policy is significantly cheaper than relocation; for example, a 5% emission reduction costs approximately 62.5 €/tCO2 via efficient trading, compared to roughly 200 €/tCO2 via relocation.
• Relocation of steel production to developing countries may increase global CO2 emissions because those countries typically emit twice as much CO2 per unit of steel production as OIRs.

APA

González-Eguino, M., Galarraga, I., & Ansuategi, A. (2010). Carbon leakage and the future of Old Industrial Regions after Copenhagen. Basque Centre for Climate Change. https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201003030544121910745428.pdf

Chicago

González-Eguino, Mikel, Ibon Galarraga, and Alberto Ansuategi. Carbon leakage and the future of Old Industrial Regions after Copenhagen. Basque Centre for Climate Change, 2010. https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201003030544121910745428.pdf.

Wikipedia

{{cite report |last1=González-Eguino |first1=Mikel |last2=Galarraga |first2=Ibon |last3=Ansuategi |first3=Alberto |title=Carbon leakage and the future of Old Industrial Regions after Copenhagen |publisher=Basque Centre for Climate Change |date=February 2010 |url=https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201003030544121910745428.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{gonzlezeguino2010carbon, author = {González-Eguino, Mikel and Galarraga, Ibon and Ansuategi, Alberto}, title = {{Carbon leakage and the future of Old Industrial Regions after Copenhagen}}, institution = {Basque Centre for Climate Change}, year = {2010}, month = feb, url = {https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201003030544121910745428.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }