Carbon Leakage Research Articles

Climate Policy Uncertainty, Environmental Regulatory Arbitrage, and Internal Carbon Leakage in the European Union: Fourier ARDL and Causality Analyses

Climate Policy Uncertainty, Environmental Regulatory Arbitrage, and Internal Carbon Leakage in the European Union: Fourier ARDL and Causality Analyses

Unintended consequences of environmental regulation of maritime shipping: Carbon leakage to air shipping

Unintended consequences of environmental regulation of maritime shipping: Carbon leakage to air shipping

Shore power mitigates the prevailing carbon leakage driven by maritime market-based measures: A dynamic system interpretation

Shore power mitigates the prevailing carbon leakage driven by maritime market-based measures: A dynamic system interpretation

Tax Instruments as a Key Driver of the Green Transition: The Role of Fiscal Policy in Sustainable Development

Fiscal instruments are pivotal in the green transition, shaping economic incentives for sustainable development. This paper examines carbon taxes, environmental levies, green investment tax credits, renewable energy incentives, and energy subsidies, assessing their effectiveness in reducing emissions, enhancing energy efficiency, and driving ecological innovation. Well-designed tax policies, supported by a stable regulatory framework and equitable revenue redistribution, can align environmental goals with economic competitiveness. However, challenges such as carbon leakage, compliance costs for industries, and public resistance continue to hinder their implementation. Strengthening tax enforcement, improving the collection of environmental levies, and integrating green investment tax credits into broader macroeconomic strategies are essential for ensuring stable funding for environmental programs. This study evaluates the role of fiscal instruments in the green transition, identifying key challenges and opportunities for optimizing tax policies to reduce emissions, stimulate ecological innovation, and maintain economic stability through coordinated tax reforms and international cooperation.

Carbon pricing mechanisms for reducing greenhouse gas emissions and encouraging sustainable industrial practices

The global challenge of climate change has intensified the need for effective policies to reduce greenhouse gas (GHG) emissions and promote sustainability. Carbon pricing mechanisms, including carbon taxes and emissions trading systems (ETS), have emerged as critical tools for mitigating environmental impact while encouraging industries to adopt cleaner technologies. These mechanisms internalize the social cost of carbon emissions, creating financial incentives for businesses to reduce their carbon footprint and transition toward low-carbon operations. By establishing a market price for carbon, such policies drive innovation, enhance energy efficiency, and support the development of renewable energy sources. From a broader perspective, carbon pricing frameworks have been implemented across various economic sectors, influencing corporate strategies, investment decisions, and government policies. These approaches aim to balance economic growth with environmental responsibility, ensuring that industries can achieve sustainable development without compromising profitability. However, their effectiveness depends on factors such as regulatory design, market stability, and compliance enforcement. Narrowing the focus, this paper examines real-world case studies of successful carbon pricing implementations, assessing their impact on industrial emissions, technological advancements, and financial performance. It explores the challenges of carbon leakage, policy harmonization, and the role of complementary measures such as subsidies and green financing. The analysis highlights best practices for optimizing carbon pricing strategies to enhance economic resilience while achieving net-zero emissions goals. This paper concludes with policy recommendations for stakeholders, emphasizing the need for global cooperation, transparent carbon markets, and data-driven decision-making to maximize the effectiveness of carbon pricing in fostering sustainable industrial practices.

Carrying Carbon? Negative and Positive Carbon Leakage With International Transport

ABSTRACTThis paper studies how carbon pricing affects greenhouse gas (GHG) emissions from international transport, production, and consumption of traded goods by modeling the international transport sector explicitly. Strategic behavior of a transport firm generates a novel mechanism of carbon leakage across borders and sectors. The effectiveness of carbon pricing depends on whether the backhaul problem (i.e., the imbalance of shipping volume in outgoing and incoming routes) is present. If the backhaul problem is absent, carbon pricing is effective in reducing global GHG emissions. With the backhaul problem, carbon pricing on goods production results in cross‐border carbon leakage. However, strategic freight‐rate setting by the transport firm mitigates this leakage. The opportunity for foreign direct investment (FDI) also affects carbon‐pricing effectiveness because the transport firm tries to deter FDI. Surprisingly, carbon pricing in the transport sector may not affect GHG emissions at all. Moreover, domestic carbon pricing on goods production may decrease GHG emissions from both transport and foreign production even if there is no domestic production under FDI.

Italian firms’ trading behavior in the European carbon market

Abstract This paper investigates the trading behavior of firms regulated by the European Union Emission Trading System (EU ETS). Focusing on the first three periods of the EU ETS (2005–2021), our study specifically analyses the factors influencing ETS firms’ decisions to participate in the emission allowances market and the intensity of their trading activities. To conduct this research, we employ a panel double-hurdle model and leverage data from the Italian section of the European Transaction Log, in conjunction with ORBIS Bureau Van Dijk data. Our findings indicate that transaction costs, such as information and search costs, and net position are the primary determinants shaping the trading behavior of Italian firms throughout all phases of the EU ETS. These results hold true even when considering buyers and sellers separately, as well as interfirm and intrafirm trades. In contrast, the ability to reduce emissions decreases the probability of market participation and trade intensity only for purchasing ETS firms, and it reduces both the probability and intensity of trade only for internal exchanges. Energy-producing firms engage more in buying allowances, while carbon leakage sectors firms are more likely to sell excess allowances. Furthermore, belonging to these sectors appears to have no significant effect on intrafirm trade. These findings suggest that policy interventions such as reducing information and search costs, enhancing market transparency, and introducing price management mechanisms could improve market efficiency and the overall effectiveness of the EU ETS.

Towards equitable carbon responsibility: Integrating trade-related emissions and carbon sinks in urban decarbonization.

Towards equitable carbon responsibility: Integrating trade-related emissions and carbon sinks in urban decarbonization.

The Carbon Border Adjustment Mechanism: Opportunities and Challenges for Non‐EU Countries

ABSTRACTThe European Union's Carbon Border Adjustment Mechanism (CBAM) represents a groundbreaking policy to address global climate change by mitigating carbon leakage and aligning international trade with environmental objectives. As the first initiative of its kind, CBAM imposes carbon pricing on imported goods, encouraging non‐EU producers to meet stringent environmental standards. This mechanism not only supports the EU's ambitious Green Deal targets but also drives innovation, fostering a global transition to low‐carbon technologies. This paper offers an analysis of CBAM's design, phased implementation, and possible impacts. While CBAM drives technological advancements and strengthens climate governance, it also poses challenges, including compliance burdens for developing nations and potential geopolitical tensions. CBAM also promotes sustainable economic transformation by encouraging exporters in carbon‐intensive sectors to adopt green technologies, enhancing competitiveness and resilience. However, without financial and technical assistance, compliance costs risk deepening global inequalities. This study underscores CBAM's dual role as an environmental policy and a catalyst for equitable sustainability, linking economic, environmental, and technological dimensions. The findings highlight how trade policies can address global challenges, drive innovation, and reshape international climate governance, offering insights for policymakers navigating the complexities of sustainable development.

Temporal-spatial evolution and formation mechanism of energy consumption carbon footprint at county scale in the Yellow River Basin

The development and implementation of county carbon control action plans in the Yellow River Basin (YRB) are crucial for realizing the “dual carbon” goals and modernizing national governance. Utilizing remote sensing data from 2001 to 2020, this study constructs a light-carbon conversion model and a carbon footprint model to simulate the carbon footprint of county energy consumption in the YRB. Employing spatial autocorrelation and spatial Durbin models, the study examines the temporal-spatial evolution characteristics and spatial effect mechanism. The results show that: (1) The county carbon footprint increased year by year. The distribution of the high carbon footprint is consistent with that of energy-intensive areas. The carbon cycle system is significantly unbalanced, and the counties with carbon deficit spread inland. (2) The carbon footprint exhibits significant spatial dependence, and the high carbon spillover effect is significant. Regional joint prevention and control strategy is essential to control the carbon footprint. Otherwise, the inter-regional carbon leakage effect may occur. (3) The current stage of economic development and industrial structure upgrading is not conducive to low-carbon development. Because of the energy rebound effect, technology development has not played the expected emission reduction effect. Nevertheless, the technology level and residents’ living standard are critical factors in reducing the carbon footprint. Government intervention, urbanization, human capital, and agricultural energy inputs increase the carbon footprint.

Does a carbon trading system lead to carbon leakage? -from China's carbon pilots

Does a carbon trading system lead to carbon leakage? -from China's carbon pilots

From carbon leakage to (re)industrialisation: An assessment of the ecological footprint of imports in developed countries

From carbon leakage to (re)industrialisation: An assessment of the ecological footprint of imports in developed countries

Bi-level planning of power system considering hybrid carbon leakage

Bi-level planning of power system considering hybrid carbon leakage

Трансграничные эффекты экологической политики Европейского союза: до и после «Зелёной сделки»

EU environmental policy primarily addresses the internal problems of the Union. At the same time, due to the size of the EU economy and the vigorous nature of the policy, numerous transboundary effects can arise, resulting in environmental changes in third countries and, indirectly, worldwide. The article examines the negative and positive transboundary externalities of EU environmental policy and speculates on the future international effects of the European Green Deal. The author describes typical examples of externalities of the European environmental regulation. It is revealed that the international trade is the main channel of their distribution. Their negative impact on third countries usually takes the form of excessive use of national natural resources, as well as the form of “carbon leakage” which stems from the EU emissions trading system. Positive externalities encompass the Brussels effect and demonstration effect and contribute to the development of environmental regulation in partner countries. The energy reform and carbon border adjustment mechanism are identified as the most important provisions of the Green Deal’s international dimension. The potential impact of the Green Deal’s transboundary externalities is described in the form of scenarios for different groups of countries. African hydrocarbon exporters are expected to suffer the greatest damage. At the same time, they have the best prospects for green transformation. Other countries are likely to be forced to speed up the decarbonisation of their economies in the medium term, while the most developed and powerful of them, such as the United States and China, stand to benefit by the expanding demand for environmental technologies

Decision-making of Enterprise Greenwashing Behavior Under The Background of Carbon Tariff

Research background: As the EU deals with carbon leakage through carbon tariffs, export enterprises of some countries that do not meet the carbon emission standards face the problem of increasing export costs, so these enterprises have the tendency of "green washing". Therefore, how enterprises make decisions to deal with carbon tariffs and avoid the impact of changes in the terms of trade has become a hot topic. Based on the cost constraints of enterprises in developing countries, the information asymmetry between upstream and downstream enterprises, and the external environment constraints such as government and enterprise regulation and subsidy strategies, enterprises will make different decisions, including "brown enterprise" behavior that only considers economic benefits and "green enterprise" behavior that considers both economic benefits and environmental benefits. The research approach in this paper is based on game-theoretic analysis and adopts the supply chain game model proposed by Pretis (2022) [1]and Dong (2023[2]). This paper mainly discusses the different situations of maximizing the profit of individual enterprise and the profit of the whole supply chain through the game of the manufacturer's cost information advantage and the retailer's market information advantage. Finally, let business and government work together to get business to cancel the green washing practices that have been adopted. Conclusion: Based on the hypothesis that the EU is imposing carbon tariffs on developing countries, the greenwashing behavior of manufacturers and retailers is related to the green investment return rate of enterprises, the cost and rate of return of blockchain technology, and government subsidies.

Legal Implications for the BRICS Countries in the Carbon Trading System Through Carbon Exchanges: Perspective from the Precautionary Principle

The largest emitting countries in the world are predominantly developing countries, including the BRICS countries. The general principle of “climate justice” asserts that the largest emitting countries should take the lead in efforts to reduce greenhouse gas emissions. The legal implications for the implementation of climate change mitigation efforts play an active role in the implementation and establishment of the carbon exchange concept in the context of the carbon trading system. The urgency of listing on the carbon exchange is driven by the precautionary principle of global carbon accounting, which aims to avoid the risk of carbon leakage. The purpose of this research is to examine the obligation of emitting countries to make ambitious efforts towards reducing their greenhouse gas emissions while also upholding the basic principles of accountability and transparency. Offsetting the amount of carbon emitted by each country is largely calculated based on carbon credits purchased. In order to prevent double counting, carbon exchanges have the responsibility of recording the sale of carbon units with certificates issued under a “polluter pays” system.

Do Anti-Dumping Measures Count? The Emissions Adjustment in Sustainable Development Policies

Following the economic shocks of recent decades, characterized by the destabilization of markets and pressure on national economies, protectionist policies have seen a significant increase. Thus, anti-dumping has become a convenient and frequently used tool in the political game of trade. In the context of the transition toward a climate-neutral economy, anti-dumping measures have become a topic of great interest due to their indirect effects on CO2 emissions. Often used to protect domestic industries from unfair trade practices, these measures influence trade and the geographical redistribution of production, contributing to the phenomenon of “carbon leakage”. By transferring emissions from countries with strict climate regulations to economies with more permissive standards, anti-dumping measures can undermine global efforts to reduce emissions. Trade policies are becoming, in this context, an important tool in regulating international trade. Consequently, the objective of this paper is to analyze the impacts of anti-dumping measures, primary energy consumption, and urbanization on CO2 emissions in OECD countries for the period 2000–2021. The methodology used is based on dynamic A.R.D.L. models using panel data. Our results suggest that anti-dumping measures and primary energy consumption influence CO2 emissions and are statistically significant, at least at the 10% level. The results of this study are useful to both policymakers and environmental authorities in developing trade policies that support both economic development and emission-reduction targets.

Analyzing the carbon pricing-leakage nexus through structural gravity estimation

Carbon emissions drive climate change, and failure to reduce these emissions could lead to disastrous consequences. Countries impose carbon pricing as an instrument to reduce carbon emissions. However, carbon leakage is a counteractive mechanism where countries with higher carbon emission prices may see their sectors outsource production to countries with lower prices or lose competitiveness and market share to foreign companies with lower production costs. This study confirms that fuel excise taxes are the leading channel of carbon leakage. Structural gravity estimates show that carbon pricing based on carbon taxes and emission trading schemes (ETS) does not cause carbon leakage, but fuel excise taxes and ETS exemptions have a significant impact. This finding is supported when looking at carbon prices in different sectors. Thus, policymakers should consider adjusting fuel excise taxes accordingly.

Review of the Chinese Aluminum Industry’s Low-Carbon Development Driven by Carbon Tariffs: Challenges and Strategic Responses

Carbon tariffs are designed to prevent carbon leakage and encourage global industries to adopt low-carbon practices, which present significant challenges for China’s aluminum industry. A critical issue for China’s aluminum sector is how to effectively reduce carbon emissions while maintaining competitiveness in the face of increasingly strict carbon regulations. This review is based on an extensive examination of high-quality, authoritative research literature, industry data, and policy reports. Accurate data have been systematically summarized, and key findings from reputable studies have been extracted to support the perspectives presented in this review. On this basis, this review systematically analyzes the current status of China’s aluminum industry, emphasizing its reliance on fossil fuels, slow transition to low-carbon technologies, and the inadequate use of recycled aluminum. The potential impacts of carbon tariffs are assessed, highlighting increased carbon costs, reduced production scales, and diminished market competitiveness in foreign markets. To address these challenges, the study proposes several pathways for carbon reduction in China’s aluminum industry, including accelerating the adoption of recycled aluminum, enhancing energy efficiency, advancing low-carbon innovations, and developing supportive policy frameworks. Implementing these measures is vital for decreasing carbon emissions and ensuring the long-term sustainability of the industry amid global climate initiatives.

Economic Impact of the Application of the ETS to European Ports: Analysis of Different Scenarios

The fight against climate change is one of the main global challenges of our time, and the European Union (EU) seeks to achieve climate neutrality and energy transition for the continent by 2050 through various policies. This research studies the economic implications of the EU Emissions Trading System (ETS) on European ports. By analysing various maritime scenarios, the study assesses how the ETS influences shipping routes, port competitiveness, and overall economic activity. A key finding is that the ETS imposes significant additional costs on shipping companies, which could lead to adjustments in routes and a shift in cargo volumes to ports in regions with less stringent environmental regulations. This could result in job losses in European port communities and reduce the competitiveness of European ports. In addition, the potential for carbon leakage, where shipping activities are simply relocated to regions with fewer emission controls, is explored.