tag:blogger.com,1999:blog-22031270.post3287288814034132779..comments2023-11-03T19:05:08.512+11:00Comments on Harry Clarke: Carbon leakage effects leak awayUnknownnoreply@blogger.comBlogger1125tag:blogger.com,1999:blog-22031270.post-65180727837190327242008-07-06T19:00:00.000+10:002008-07-06T19:00:00.000+10:00Very good post Harry,My understanding is that pric...Very good post Harry,<BR/><BR/>My understanding is that price related factors that influence the carbon leakage associated with the reduction in production of a particular good are the price-elasticity of supply, the price-elasticity of demand, and the percentage of production of that good that is from countries that are reducing their greenhouse emissions in such a way that it affects production of that good.<BR/><BR/>A related factor is the amount of capital investment in an industry. Industries like aluminium production have huge capital requirements and relocating it overseas would require huge amounts of capital.<BR/><BR/>It seems to me that the prisoners dilemma issue is central to carbon leakage. I think climate policy in an individual country should be as much about resolving the prisoners dilemma as it is about its direct impact on emissions. One way of doing this is by providing examples of policies that work and can be replicated elsewhere. It would be a more efficient outcome for most countries to not worry about carbon leakage and reduce their greenhouse gas emissions that it would be if countries simultaneously reduced their emissions but tried to avoid carbon leakage by providing free permits to TEEIs or a similar policy.<BR/><BR/>It seems to me that emissions from fossil fuels that we export is a very similar issue. Suppose for example that we apply a carbon tax the coal that we export (possibly to countries that are not mitigating). This may reduce that quantity exported. The increase in the international price could lead to increased coal production elsewhere. How significant this effect would be would depend on price-elasticities of supply and demand, and on the size of our share of world coal production. Conversely if we continue to export coal as much as before, without internalising the social cost of carbon in any way, then are we free-riding in a prisoners dilemma?Unknownhttps://www.blogger.com/profile/18205246627676022135noreply@blogger.com