Climate Campaigns, Cap and Trade, and Carbon Leakage: Why Trying to Reduce Your Carbon Footprint Can Harm the Climate

Grischa Perino

Journal of the Association of Environmental and Resource Economists, 2015, vol. 2, issue 3, 469 - 495

Abstract: Governments and environmental NGOs campaign for carbon footprint reductions by households. Many of the behavioral changes recommended reduce demand for goods produced by sectors covered by cap-and-trade schemes. With a binding cap, greenhouse gas emissions from those sectors do not change. I show that climate campaigns create leakage effects if coverage of cap-and-trade schemes is incomplete. Campaigns that shift demand away from sectors subject to a cap increase aggregate emissions, as do campaigns to reduce carbon footprints generally if the capped sectors are emission intensive. However, campaigns targeting sectors not covered by a cap-and-trade scheme or propagating retiring of emission allowances reduce emissions.

Date: 2015
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Working Paper: Climate campaigns, cap-and-trade and carbon leakageː Why trying to reduce your carbon footprint can harm the climate (2015)
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