Tackling Leakage in a World of Unequal Carbon Prices

The report analyzes carbon leakage, which occurs when production shifts from regions with high carbon prices to those with lower or no prices, undermining climate policy effectiveness. It examines the EU ETS as a frontrunner and compares it with emerging systems in the US and Japan. The document evaluates mitigation strategies, including free allowance allocation, investment subsidies, and border adjustment measures (BAMs). It specifically analyzes the leakage potential of energy-intensive sectors like cement, steel, and aluminium, and discusses the legal and multilateral challenges of implementing border adjustments under WTO rules.

• Carbon leakage occurs when "price differentials" lead to a "shift in production from regions with high carbon prices to regions with lower or no carbon prices", which can "undermine the effectiveness of climate policy".
• The EU ETS is a primary example of a carbon pricing system, but it faces challenges with "carbon leakage" and "competitiveness" for "trade-exposed" industries.
• A multilateral approach to border adjustments is recommended to "prevent hijacking" of the system and to "avoid trade conflicts", suggesting a "positive list of goods" for adjustment.

APA

Dröge, S., van Asselt, H., Brewer, T., Grubb, M., Ismer, R., Kameyama, Y., Mehling, M., Monjon, S., Neuhoff, K., Quirion, P., Schumacher, K., Mohr, L., Suwala, W., Takamura, Y., Voituriez, T., & Wang, X. (2009). Tackling Leakage in a World of Unequal Carbon Prices. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2014/11/cs-leakage-final-230909.pdf

Chicago

Dröge, Susanne, Harro van Asselt, Thomas Brewer, Michael Grubb, Roland Ismer, Yasuko Kameyama, Michael Mehling, et al. Tackling Leakage in a World of Unequal Carbon Prices. Climate Strategies, 2009. https://climatestrategies.org/wp-content/uploads/2014/11/cs-leakage-final-230909.pdf.

Wikipedia

{{cite report |last1=Dröge |first1=Susanne |last2=van Asselt |first2=Harro |last3=Brewer |first3=Thomas |last4=Grubb |first4=Michael |last5=Ismer |first5=Roland |last6=Kameyama |first6=Yasuko |last7=Mehling |first7=Michael |last8=Monjon |first8=Stephanie |last9=Neuhoff |first9=Karsten |display-authors=etal |title=Tackling Leakage in a World of Unequal Carbon Prices |publisher=Climate Strategies |date=1 September 2009 |url=https://climatestrategies.org/wp-content/uploads/2014/11/cs-leakage-final-230909.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{drge2009tackling, author = {Dröge, Susanne and van Asselt, Harro and Brewer, Thomas and Grubb, Michael and Ismer, Roland and Kameyama, Yasuko and Mehling, Michael and Monjon, Stephanie and Neuhoff, Karsten and Quirion, Philippe and Schumacher, Katja and Mohr, Lennart and Suwala, Wojciech and Takamura, Yukari and Voituriez, Tancrede and Wang, Xin}, title = {{Tackling Leakage in a World of Unequal Carbon Prices}}, institution = {Climate Strategies}, year = {2009}, month = sep, url = {https://climatestrategies.org/wp-content/uploads/2014/11/cs-leakage-final-230909.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }