Revisiting Carbon Leakage

August 6, 2021

Preview Citation

Format: Chicago

Florian Misch, and Philippe Wingender. Revisiting Carbon Leakage, (USA: International Monetary Fund, 2021) accessed November 8, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper estimates the carbon leakage rate across countries, arguably a key parameter in the international climate policy discussion including on border carbon adjustment, but which remains subject to significant uncertainty. We propose innovations along two lines. First, we exploit recently published data on sector-country-specific changes in energy prices to identify changes in domestic carbon emissions and other flows (rather than the historically limited variation in carbon prices or adherence to international climate agreements). Second, we present a simple accounting framework to derive carbon leakage rates from reduced-form regressions in contrast to existing papers, thereby making our results directly comparable to model-based estimates of carbon leakage. We show that carbon leakage rates differ across countries and could be larger than what existing estimates suggest.

Subject: Consumption, Energy prices, Energy pricing, Environment, Expenditure, Greenhouse gas emissions, National accounts, Prices

Keywords: Carbon flow, Carbon leakage, Carbon leakage, CO2 content of trade, Competitiveness, Consumption, Emission constraint, Emission spillovers, Energy prices, Energy pricing, Global, Greenhouse gas emissions, Leakage rate, Price data

Publication Details

Pages:

29
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/207
Stock No:

WPIEA2021207
ISBN:

9781513593029
ISSN:

1018-5941

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