Approaches to Carbon Leakage in Carbon Pricing Policies

Abstract

Broad and ambitious climate action is urgently needed since the Paris Agreement’s goals are still out of sight. While globally aligned and joint climate policy measures would be the best solution to avoid carbon leakage, in their absence, alternative measures can address carbon leakage risks. However, they can also result in fragmentation and inefficiencies. This paper provides an overview of how Climate Club member countries and selected other major GHG emitters address carbon leakage risks within their carbon pricing policies, and highlights areas for cooperation to reduce inefficiencies and collectively increase ambition.