Identifying carbon leakage sectors in the EU ETS and implications of results

Abstract

A detailed description of the European Commission's carbon leakage quantitative assessment methodology is used to assess sectors at risk of carbon leakage. It sets out the steps taken to follow the EU Emissions Trading Scheme (EU ETS) Directive and the necessary work to generate useful data sets, as well as gaps in the assessment and its results. The resulting list of sectors at risk of carbon leakage is discussed from a broader perspective. The impact on emissions exempt from auctioning is also quantified. The results of the carbon leakage assessment show that, despite the carbon leakage provisions of the EU ETS Directive, the majority of emission allowances will be auctioned in Phase III of the EU ETS and, moreover, that the majority of emissions that will be freely allocated originate from only a small number of energy-intensive sectors.