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Carbon leakage |
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Carbon leakage is emerging to be a major hindrance in the progress of the Kyoto Protocol provisions aimed at reducing global emission levels of greenhouse gases, including carbon.
Increase in emission levels of one country due to a decrease in the same in another country is known as carbon leakage. This is due to many causes. If a country has a strict climate policy, this might lead to diverse conditions that may benefit another country with relatively relaxed climate laws. This concept is discussed in brief below.
Carbon leakage can occur if environmental laws, particularly emission laws of a country lead to increased costs. In this scenario, another country with a relaxed policy would be in a position to take advantage in terms of trading. This can lead to a shift in production to a country with cheaper costs but lower environmental conditions. This way, global emission levels will not be influenced by strict policies of the first country. On the contrary, emission levels may increase due to malpractices by the other country where laws are much lenient. So, in trying to bring about reduced greenhouse gas emissions in one part of the world, the results may actually be worse than before.
Another factor that may lead to carbon leakage is a fall in price of commodities brought about by strict environmental policies. Often, environmental laws and policies can lead to addition of premium to certain fuels which may result in fall in demand. In this situation, countries which have not experienced this rise in price can take advantage of the situation and utilize this fall in demand. This will negate the positive effect of the strict policies of the first country.
The threat of carbon leakage does not necessarily come from competing countries or nations. Strict environmental laws may make many organizations to shift their production to other countries which do not have such policies. This decision is quite practical but it will have a negative impact on global emission levels.
Carbon leakage has been identified as a major hindrance in implementing the Kyoto Protocol provisions. Only 37 countries have agreed to cap their greenhouse gas emissions. The majority of countries, notably large developing countries like Brazil, India and China are providing safe refuge for many organizations who are finding ways out of the environmental laws of their country.
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