Plugging industry’s carbon leakage risks

Conventional wisdom holds that even the EU’s current unilateral 20% greenhouse gas emissions reduction target by 2020 risks the loss of key heavy industries to high-carbon emerging economies unless these sectors are compensated. But how true is this and what should be done? Paul Hatchwell sifts the evidence

Port Talbot steelworks, from CorusSince the advent of the EU emissions trading scheme (EU ETS) in 2005, the world’s first and so far only mandatory regional carbon cap-and-trade scheme, carbon leakage has become an ever more politically loaded issue.

The fear is that energy-intensive heavy industries, facing higher costs because of the EU ETS, will lose out to overseas competitors. And instead of carbon dioxide emissions being cut, they will ‘leak’ out of Europe to the developing world.

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