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The report examines carbon leakage risks for energy-intensive industries—specifically cement, steel, and aluminium—when facing unequal global carbon prices. It evaluates tools such as free allocation of emission rights and border adjustments, noting that while free allowances can reduce leakage, they may distort carbon price signals and reduce incentives for low-carbon investment. The analysis suggests that border adjustments are particularly suitable for the cement sector due to the homogeneity of production technologies and carbon intensity across regions.

The report examines the economic and environmental impacts of carbon pricing on industrial competitiveness and the risk of carbon leakage, where emissions shift to jurisdictions with less stringent policies. It analyzes six policy options—border taxes, mandatory allowance purchases, embedded carbon product standards, aid to industry, free allowances, and sectoral approaches—concluding that while border carbon adjustments (BCAs) are theoretically more effective at reducing leakage in specific sectors, they face significant technical, administrative, and WTO legal challenges. The document emphasizes that only a small fraction of GDP (typically less than 1%) is truly at risk, primarily in energy-intensive, trade-exposed sectors like cement, steel, and aluminum.

The paper investigates whether removing tariffs on environmental goods can significantly reduce GHG emissions. It concludes that the 'Friends of the EGS' list of 153 goods would only have a material impact through renewable energy technologies, but that tariff removal alone is insufficient to drive significant uptake without accompanying policies like feed-in tariffs. The author suggests that for trade liberalization to be effective, lists must be based on objective environmental needs rather than commercial interests and must be supported by capacity-building measures in developing countries.

The report argues that stabilizing atmospheric CO2 at 350 ppm is economically feasible, with estimated costs ranging from 1% to 3% of global GDP per year. It challenges 'go slow' economic recommendations, specifically critiquing the DICE model's default assumptions, and suggests that the costs of inaction far outweigh the costs of rapid mitigation. The authors emphasize that achieving this target requires a comprehensive global transition to carbon-free energy and the implementation of negative emissions technologies, such as large-scale reforestation and biomass energy with carbon capture and storage (CCS).

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.

The document argues that international financial support for climate mitigation in developing countries must shift from simply purchasing cheap carbon offsets to supporting comprehensive low-carbon development strategies. It details a variety of Public Finance Mechanisms (PFMs)—including grants, loans, equity, and risk guarantees—and maps these to the specific needs of project developers, private investors, and governments. The authors emphasize that tailored support is necessary to address incremental costs and high policy and technology risks, suggesting that a 'social value of carbon' could serve as a reference price to stabilize investments. The paper concludes that a combination of bilateral cooperation for flexible grants and multilateral institutions for large-scale loans and guarantees is essential to leverage the private capital needed for a global low-carbon transition.

The document defines carbon pricing as a market-based strategy to internalize the costs of climate impacts, driving a shift toward a clean energy economy. It details two primary mechanisms: cap-and-trade, which limits total emissions through tradable allowances, and carbon taxes, which set a fixed fee per ton of carbon. The text emphasizes that while both can effectively reduce emissions, they require complementary policies and careful design to address equity concerns, such as the regressive impact on low-income households and the economic transition for fossil-fuel-dependent communities. It highlights existing examples like the EU-ETS and RGGI, and suggests that revenues from these programs can be used for rebates, clean energy investment, or deficit reduction.

The Climate Strategies Research Prospectus 2009 details a comprehensive program of academic research designed to support government decision-makers. The work is organized into three primary themes: industrialised country commitments and global market mechanisms (including carbon leakage and emissions trading system linkages), global engagement, technology and finance (focusing on the UNFCCC's Reformed Financial Mechanism and technology innovation centres), and industry-specific sectoral approaches (specifically the steel and maritime sectors). The organization operates as a not-for-profit network, convening international experts to provide independent, fact-based assessments for policy formation, with a particular emphasis on the European Union, North America, and the Asia-Pacific region.

The policy brief examines the trade-off between free allowance allocation and border adjustments in emission trading schemes. It argues that while free allowances protect against carbon leakage, they undermine the effectiveness of carbon pricing. The author proposes that combining full auctioning with border adjustments—strictly limited to carbon-intensive commodities and based on the carbon intensity of best available technology—can address leakage. However, to avoid WTO violations and suspicions of protectionism from developing countries, these measures must be pursued through international cooperation rather than unilaterally.

The document examines the transition from fragmented regional carbon markets to a global architecture, analyzing the risks of market manipulation, environmental integrity failures, and the technical challenges of linking different systems. It proposes a framework of institutional functions—ranging from decentralized cooperation to centralized oversight—to manage price volatility, ensure robust monitoring, reporting, and verification (MRV), and regulate financial derivatives to prevent excessive speculation.

The report argues that woody biomass is a low-carbon substitute for fossil fuels that can support forest health and rural economies if managed sustainably. It identifies high harvesting and transport costs, a lack of site-specific scientific data, and public distrust of federal land management as primary barriers. The author recommends technology-neutral energy incentives, the establishment of national environmental indicators, and the use of collaborative, multi-stakeholder frameworks to ensure biomass harvesting complements ecological restoration and biodiversity conservation.

The paper analyzes carbon embedded in China's trade using a Multi-Region Input-Output (MRIO) model. It finds that while China is a net exporter of embedded carbon, this is due to the overall carbon intensity of its economy rather than the specific composition of its exports. The author demonstrates that there is no correlation between revealed comparative advantage and carbon intensity in the Chinese economy. Consequently, the paper argues that border tax adjustments on carbon-intensive imports would have minimal impact on China's trade success and limited benefit for developed countries. Finally, it discusses the theoretical and practical implications of harmonized global carbon prices, suggesting they could enable developing countries to 'leapfrog' to cleaner technologies if supported by public investment.

The paper finds that integrating REDD into global carbon markets significantly reduces tropical deforestation emissions and lowers overall climate policy costs by 10-25%. While it slightly decreases investments in some renewable energy and nuclear R&D (by 1-10%), it may marginally increase investments in carbon capture and storage (CCS) and integrated gasification combined cycle (IGCC) technologies. The study highlights that 'banking' credits enhances these cost savings and provides policy flexibility for future more stringent targets.

The report compares the climate change strategies of India, Brazil, China, Mexico, and South Africa, detailing their objectives, development processes, emission scenarios, and specific mitigation and adaptation interventions. It observes that while these plans identify national priorities and visions, they often lack concrete implementation procedures and specific action-steps, particularly regarding adaptation.

The report assesses the potential for linking emissions trading schemes (ETS) globally, concluding that an OECD-wide company-level carbon market by 2015 is a "highly ambitious goal." It identifies that while the EU ETS seeks to be a nucleus for a global market, most emerging schemes prioritize domestic price control over full bilateral linking. The study highlights significant barriers to linkage, including divergent target stringencies, the use of intensity-based targets (notably in Canada), and different cost-containment measures like price caps. It distinguishes between unilateral links (one-way recognition), bilateral/multilateral links (mutual recognition), and indirect links (via common mechanisms like the CDM). The report also examines the legal complexities of such links, particularly the constraints on US state-level agreements and the EU's regulatory mandates. It suggests that a "bottom-up" process of linking regional markets could serve as a fallback if top-down international agreements, such as a Kyoto successor, fail.

The document examines the functioning of the Kyoto Protocol's market mechanisms—the International Emissions Trading (IET), Joint Implementation (JI), and the Clean Development Mechanism (CDM)—and explores options for their expansion or replacement in a post-2012 framework. It discusses new proposals such as the Market Mechanism for Sustainable Development (MMSD), REDD, and sectoral CDM, while highlighting challenges regarding additionality, environmental integrity, and the equitable distribution of projects in developing countries.

Michelle Chan of Friends of the Earth testified that traditional cap-and-trade systems are prone to speculative bubbles and regulatory gaps, drawing parallels to the 2008 financial crisis. She warns that carbon offset credits and complex derivatives could lead to 'subprime carbon' risks where securities are based on non-existent or failing emission reductions. To avoid these risks, she advocates for the McDermott bill, which excludes carbon offsets and implements a stable carbon price to prevent boom-bust cycles.

The document examines the criteria for identifying sub-sectors exposed to a significant risk of carbon leakage under EU ETS Phase III. It argues that calculating additional costs without accounting for free allowances is logically inconsistent, as free allocation is intended to mitigate the very leakage it is meant to identify. Using UK data, the author illustrates that a gradual inclusion of sectors as free allocations decline from 80% in 2013 to 30% by 2020 provides better visibility, allows for learning, reduces economic distortions, and maintains incentives for international climate cooperation.

The report projects emissions for the EU, Japan, and other Annex I countries up to 2012 and 2020. It finds that while the EU ETS is likely to have a surplus of allowances up to 2012 at a price of €20/tCO2, the EU-15 and Japan will face overall deficits relative to their Kyoto targets. Conversely, Russia, Ukraine, and new EU member states are projected to have significant emission surpluses. Looking toward 2020, the EU ETS is expected to enter a deficit unless efficiency and renewables targets are met, suggesting a rise in carbon prices post-2012.

The document analyzes the 'boom and bust' pattern of carbon prices in emissions trading schemes, attributing it to fixed supply facing highly uncertain demand and asymmetric information. It argues that price collapses undermine low-carbon investment and economic efficiency. While rejecting carbon taxation as a viable alternative due to political and implementation hurdles, the author proposes several policy options to stabilize markets, highlighting reserve price auctions in the EU ETS as a feasible, low-complexity mechanism to reduce supply automatically if prices fall too low.