Carbon leakage myth buster

The document challenges the justification for granting free carbon allowances to EU industries to prevent 'carbon leakage' (production relocation). It argues that there is no compelling evidence of such leakage and that free allocations instead create windfall profits for companies, disincentivize low-carbon innovation, and deprive the public of auctioning revenues. The brief recommends a transition to 100% auctioning of allowances and a more stringent, transparent criteria for the carbon leakage list to ensure only truly high-risk sectors receive support.

• There is no conclusive evidence that EU climate policies have caused companies to relocate production abroad, and future risks are likely to be minimal even with full auctioning of permits.
• Free allocation of pollution permits has hindered the adoption of sustainable technologies, causing some European industries to fall behind global carbon efficiency averages, specifically in cement production where Asia (India and China) is now more efficient.
• Industrial companies have generated significant windfall profits by passing the cost of freely obtained carbon permits to customers or by selling surplus allowances resulting from flawed allocation rules based on historical production.
• The EU ETS revision proposal from July 2015 is criticized for maintaining a low threshold (0.2) for the carbon leakage list, which would allow 94% of industrial emissions to receive 100% free allocation.
• Phasing out free allowances in favor of full auctioning between 2021 and 2030 could mobilize approximately €160 billion in additional revenues to fund breakthrough low-carbon industrial technologies.
• State aid used to compensate electro-intensive industries for 'indirect carbon costs' (higher energy bills) reduces the incentive for these companies to switch to renewable electricity.

APA

Carbon Market Watch (2015). Carbon leakage myth buster. https://carbonmarketwatch.org/wp-content/uploads/2015/10/CMW-Carbon-leakage-myth-buster-WEB-single-final.pdf

Chicago

Carbon Market Watch. Carbon leakage myth buster. 2015. https://carbonmarketwatch.org/wp-content/uploads/2015/10/CMW-Carbon-leakage-myth-buster-WEB-single-final.pdf.

Wikipedia

{{cite report |author=Carbon Market Watch |title=Carbon leakage myth buster |date=October 2015 |url=https://carbonmarketwatch.org/wp-content/uploads/2015/10/CMW-Carbon-leakage-myth-buster-WEB-single-final.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{carbonmarketwatch2015carbon, author = {{Carbon Market Watch}}, title = {{Carbon leakage myth buster}}, institution = {Carbon Market Watch}, year = {2015}, month = oct, url = {https://carbonmarketwatch.org/wp-content/uploads/2015/10/CMW-Carbon-leakage-myth-buster-WEB-single-final.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }