Webinar: Carbon Leakage: Theory, Evidence and Policy Design

Carbon prices are intended to have an efficient and fair impact on the competitiveness of firms. However, current efforts to put a price on greenhouse gas emissions around the world remain fragmented. Both the coverage and level of the carbon price vary between jurisdictions. This leads to concerns about the risk of carbon leakage. Leakage occurs if the differences in emission costs lead to the relocation of carbon-intensive activities to jurisdictions that don’t have equivalent emission reduction policies. The technical note provides an overview of the issue, discussing the theory, evidence and policy design. It draws lessons from policymaking experience and academic evidence to provide guidance to countries on how to address concerns about carbon leakage as they arise in their national contexts.