 Trade flows, carbon leakage, and the EU Emissions Trading SystemMaria Wang and Tero Kuusi Energy Economics, 2024, vol. 134, issue C Abstract: The EU Emission Trading System (EU ETS) has been shown to have reduced emissions in the participating countries and industries since its adoption in 2005. However, there is less evidence on the shifting of production outside EU to avoid emission controls. We study this so-called carbon leakage with gravity analysis of international trade flows and carbon intensities of trade. We utilize the gravity model on a sectoral level and study its implications empirically. Our findings with new OECD data indicate that some carbon leakage has in fact occurred due to the EU ETS, resulting in higher carbon content of imports to the EU. At the same time, we show that the EU ETS has induced lower carbon content of exports from the EU. In further analysis, we show that the carbon leakage we find has caused a moderate increase in total carbon content embodied in the EU’s trade, despite the decreases in exported carbon. Keywords: Carbon leakage; EU ETS; Emission trading; Trade flows; Gravity model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:134:y:2024:i:c:s0140988324002640 DOI: 10.1016/j.eneco.2024.107556 Access Statistics for this article Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant More articles in Energy Economics from Elsevier |
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