Options for Policy-Makers Addressing Competitiveness, Leakage and Climate Change

This report by the International Institute for Sustainable Development (IISD) analyzes policy options for addressing competitiveness and carbon leakage resulting from differential climate change policies and measures (PAMs). It evaluates the economic and environmental effectiveness of border carbon adjustments (BCAs), free allowance allocations, and sectoral approaches, while examining their legality under World Trade Organization (WTO) rules and their political implications for developed and developing nations.

• Competitiveness and carbon leakage are primarily concerns for a small fraction of the economy, typically estimated at no more than 1 per cent of GDP. The most vulnerable sectors include cement and lime, aluminum, paper, refining, and iron and steel.
• Carbon leakage occurs when emission reductions in one country are offset by increases elsewhere. This happens through several channels: competitiveness-driven leakage (short-term market share loss), the investment channel (long-term relocation of industry), the fossil fuel price channel (lower global energy prices increasing demand elsewhere), and the spillover of process innovations to unconstrained regions.
• The report identifies six main policy options to address these concerns: three border carbon measures (border taxes, mandatory allowance purchases by importers, and embedded carbon product standards) and three alternative domestic options (aid to industry, free allocation of allowances, and sectoral approaches).

APA

Wooders, P., Reinaud, J., & Cosbey, A. (2009). Options for Policy-Makers Addressing Competitiveness, Leakage and Climate Change. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/bali_2_copenhagen_bcas.pdf

Chicago

Wooders, Peter, Julia Reinaud, and Aaron Cosbey. Options for Policy-Makers Addressing Competitiveness, Leakage and Climate Change. International Institute for Sustainable Development, 2009. https://www.iisd.org/system/files/publications/bali_2_copenhagen_bcas.pdf.

Wikipedia

{{cite report |last1=Wooders |first1=Peter |last2=Reinaud |first2=Julia |last3=Cosbey |first3=Aaron |title=Options for Policy-Makers Addressing Competitiveness, Leakage and Climate Change |publisher=International Institute for Sustainable Development |date=October 2009 |url=https://www.iisd.org/system/files/publications/bali_2_copenhagen_bcas.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{wooders2009options, author = {Wooders, Peter and Reinaud, Julia and Cosbey, Aaron}, title = {{Options for Policy-Makers Addressing Competitiveness, Leakage and Climate Change}}, institution = {International Institute for Sustainable Development}, year = {2009}, month = oct, url = {https://www.iisd.org/system/files/publications/bali_2_copenhagen_bcas.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }