Carbon leakage risks in the Post-Paris world / by Benjamin Görlach, Elizabeth Zelljadt (Ecologic Institute, Berlin) ; on behalf of the German Environment Agency ; publisher: Umweltbundesamt ; report performed by: Ecologic Institute ; edited by: V 3.3 Economic Aspects of Emissions Trading, Monitoring, Evaluation, Alexandra Zirkel, Frank Gagelmann

Abstract

This paper examines the connection between Nationally Determined Contributions (NDCs) under the Paris Agreement on the one hand and carbon leakage on the other. Firstly, this is done by considering different types of emission targets in the NDCs. With an NDC in a carbon leakage receiving country, shifted emissions in many cases require increased mitigation efforts, so carbon leakage comes at a cost to these countries. Secondly, entrepreneurial decisions are examined more closely. The mere existence of NDCs should already have an influence on them, albeit not on immediate production decisions (production leakage), but on medium- and long-term investment decisions (investment leakage).