In this episode of podcast, I have talked about "Carbon Leakage." Carbon leakage is central to the discussion on climate policy, given the confluence of issues that are currently being debated, including the 2030 Energy and Climate Framework and the review of the EU carbon leakage. Carbon leakage is the result of asymmetrical carbon policies, especially carbon pricing, and the resulting carbon cost, which affects the international competitive position of some EU industry and could displace production and/or investment, and the emissions of the activities displaced.
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Additional Notes:
EU ETS leakage list criteria:
If an activity fulfills any of the following three thresholds, they are added to the leakage list:
If a sector has borderline values on the quantitative criteria, then the following qualitative criteria can be considered:
The focal point of the approach to leakage in the EU ETS is the leakage list. Sectors and activities on this list receive a larger proportion of free allocation (with respect to their compliance obligations) than sectors that are not on the list. If an installation is among the most carbon-efficient entities in the sector and production has not increased beyond production in the reference years (the three most-recent years for which data are available), that installation receives full free allocation (if we do not take the cross-sectoral correction factor into account).
The Quebec Cap-and-Trade scheme is characterized by its degree of political maneuverability. The sectors eligible for free allowances and the amount of free allocation are not set in stone and can be reviewed by the Ministry if and when it is deemed necessary. The auction calendar is also subject to political decisions. Two additional exceptional issues should be noted:
New Zealand ETS :
Starting in 2008 with the forestry sector, the New Zealand ETS has gradually expanded. In 2010energy and industry joined and in 2013 synthetic gases and waste sectors were included. Agriculture has had a mandatory reporting obligation for biological on-farm emissions from 2012 and was previously legislated to have surrendered obligations for these emissions from 2015, but this has been placed on hold indefinitely.
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