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GTAP Resource #5754

"The risk of carbon leakage in the context of increasing the EU greenhouse gas emission reduction target"
by Gaska, Jan, Maciej Pyrka, Robert Jeszke, Marian Mraz, Wojciech Rabiega and Monika Sekula

The lack of equal globally binding emission reduction targets is currently leading to a set of diverging GHG emissions prices across the world. This may results in distortions with direct implications on competitiveness of the industries in regions with strict climate policies (as EU) and can cause the issue of carbon leakage which is defined as the increase in emissions outside a region as a direct result of the policy to cap emission in this region.
The purpose of this paper is to assess the possible scale of carbon leakage using different assumptions and policy scenarios and identify channels to efficiently prevent the carbon leakage. The analysis has been carried out using the recursive dynamic multi-regional and multi-commodity CGE d-PLACE model. The simulations using two versions of model was presented with and without endogenous technical change to elaborate how the assumptions on technical change affect the modelling results and consequent scale of the carbon leakage.
Using the above mentioned CGE we captured the main factors, that determine the carbon leakage rates. We assessed the contribution of three channels: demand channel, competitiveness channel and energy channel to the risk of carbon leakage. Energy channel was further decomposed to the impact of sectoral structure and influence in emission intensity within each sector. Decomposition allowed us to determine the main channels through which the carbon leakage occur and pursue policy recommendations.
In the first two chapters we provide brief summary of European Union climate policy, definition of carbon leakage and the perform the review of relevant literature. Third chapter contains a brief information on the applied model and description of data sources. In the fourth one we will describe analyzed policy options (scenarios). Chapter five elaborates on the results and the last sixth one – presents additional scenarios with NDCs implemented and free allocation of emission allowances in the EU ETS.

Resource Details (Export Citation) GTAP Keywords
Category: 2019 Conference Paper
Status: Published
By/In: Presented at the 22nd Annual Conference on Global Economic Analysis, Warsaw, Poland
Date: 2019
Version: submission
Created: Pyrka, M. (4/12/2019)
Updated: Jeszke, R. (6/26/2019)
Visits: 1,099
- Dynamic modeling
- Climate change policy
- Trade and the environment
- Technological change
- European Union

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