Potential carbon leakage under the Paris Agreement

Abstract

Carbon leakage is the effect of emissions transferring to certain countries due to others having a stricter climate policy. This phenomenon is shown to have undercut the effectiveness of the Kyoto Protocol. Considering the increasingly globalised nature of the world economy, carbon leakage may have an even greater potential under the Paris Agreement some fifteen years later. Although a more global approach to combatting climate change, the Paris Agreement is susceptible to leakage because of its lack of policy harmonization and enforcement mechanisms.Here we perform the first quantitative analysis of the potential for carbon leakage under Paris, using the GTAP-E general equilibrium model of the world economy with energy and carbon emissions to analyse leakage effects under six scenarios. Two of these scenarios analyse regions implementing climate policy in isolation, two greater participation, but still not harmonized, global Paris Agreement policy, and a further two analyse the effect of a US withdrawal from the agreement. Both cases are considered with and without the US withdrawal. Our analysis demonstrates that there is potential for significant carbon leakage effects, in line with the rates produced from studies on the Kyoto Protocol. Depending on model elasticities, we find medium carbon leakage in the range of 1-9% (with a central estimate of 3-4%) under co-ordinated Paris Agreement policy across countries, compared to high leakage of 8-31% when countries operate in isolation. However, scenarios where the US withdraws from the agreement result in roughly doubling of leakage rates, in the range of 3-16% (central estimate 7%), which demonstrates the vulnerability of the Paris Agreement in its current form. To limit leakage effects greater policy co-ordination to achieve consistent implicit carbon prices is needed across countries.

Environmental and Resource Impacts from an Aggressive Regionalized Carbon Peak Policy

“…CGE models can capture a broad range of economic system interactions and feedback effects. These models have been used to assess a multitude of social economic impacts of climate policies, including dynamics in a single region − , and interactions across different regions. ,, In addition, CGE models have also been widely used to assess the interactions within an economic system, climate mitigation, and water consumption. However, previous studies either focus on direct industry water consumption or on virtual water flows among production sectors within a single province or treat China as one single region …”

“…Previous relevant studies investigate the direct environmental and resource impacts of achieving climate change targets at global and national levels. − Also, the cobenefits on air pollutant reduction and human health were examined at global, national, − and provincial levels. − Moreover, water–carbon nexus issues were investigated at city and sectoral levels. , The indirect impacts of one region’s climate change policies on other regions were also evaluated. For instance, several studies investigated carbon leakage issues under the Paris Agreement at the global level, − while a few other studies evaluated the impacts of global carbon mitigation targets on major fossil-fuels exporters, such as Russia and the Middle East region . Nationally, carbon leakage between the bioenergy sector and other sectors was investigated in Ireland by considering national carbon mitigation targets .…”

Allocating China’s CO2 Emissions Based on Economic Welfare Gains from Environmental Externalities

“…Not only local consumption but also external demand drives GHG emissions. , The Paris Agreement has urged countries to manage to achieve their low-carbon goals, but without efficient schemes to conduct climate policies, this could lead to carbon leakage among different countries − or different industries in one country . The situation has occurred where emissions are transferred from one department which has reduced emissions to another less-strict department; therefore, assigning responsibility between producers and consumers can contribute to a more efficient global climate policy. − Two of the most traditional and basic accounting methods for emissions include production-based accounting (PBA) and consumer-based accounting (CBA).…”

Farmers’ beliefs and concerns about climate change, and their adaptation behavior to combat climate change in Saudi Arabia

“…This paved the way toward the formulation of an international climate agreement in 2015 under the aegis of United Nations, commonly known as Paris Agreement. The agreement recognizes climate change as a global problem and therefore encourages all the countries to undertake collective actions to combat this issue by considerably reducing their carbon footprint [ 38 ]. At individual level, however, people may hold different beliefs about climate change and its causes.…”