Carbon Leakage in the Nordic Countries

What are the Risks and How to Design Effective Preventive Policies

image of Carbon Leakage in the Nordic Countries

Carbon leakage is a situation in which a policy-induced reduction in CO2 emissions domestically is followed by increased emissions abroad. We investigate from a Nordic perspective what industries are at risk of carbon leakage. We find that aluminum and copper, basic iron and steel and paper, all having energy intensities over 40 per cent, have the highest risk of carbon leakage. The policy of giving free emissions allowances to industries at risk of carbon leakage is relatively equally spread out, leaving industries at high risk “undercompensated” and industries at low risk “overcompensated”. We find that the leakage rates for the energy intensive industry from unilateral ambitious EU targets could be as high as 70%, and even as high as 85% if the Nordic countries unilaterally adopt more ambitious targets. The key to limit the risk of carbon leakage is collective global action.




This report was written by experts from Copenhagen Economics. Copenhagen Economics has received valuable comments and input from the associated steering group, but all results and conclusions are solely the views of the authors. The authors would like to thank everyone involved in the project for their time and valuable input.


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