Consumption- Versus Production-Based Emission Policies

Posted: 8 Oct 2014

See all articles by Michael Jakob

Michael Jakob

Potsdam Institute for Climate Impact Research

Jan Christoph Steckel

Potsdam Institute for Climate Impact Research; Mercator Research Institute on Global Commons and Climate Change (MCC)

Ottmar Edenhofer

Potsdam Institute for Climate Impact Research (PIK); Mercator Research Institute on Global Commons and Climate Change (MCC); Technische Universität Berlin (TU Berlin)

Date Written: November 2014

Abstract

Emission leakage could potentially undermine the effectiveness of unilateral climate policies. Significant emission transfers from developing countries to developed countries in the form of emissions embodied in trade have been interpreted as an indication of such leakage. To reduce leakage and provide an appropriate picture of countries’ responsibility for global emissions, an alternative proposal is to attribute emissions on the basis of consumption instead of production. However, as one unit of imported emissions generally cannot be equated with a corresponding increase in emissions released to the atmosphere, putting a price on emissions embodied in imports equal to the social cost of these emissions (e.g., by means of consumption-based emission pricing) is not an optimal policy. Hence, one should consider a broad scope of trade measures to reduce leakage, focusing on a few highly traded, emission-intensive industries. Finally, the optimal policy portfolio to address leakage may also contain free allocation of emission permits and sectoral approaches.

Suggested Citation

Jakob, Michael and Steckel, Jan and Steckel, Jan and Edenhofer, Ottmar, Consumption- Versus Production-Based Emission Policies (November 2014). Annual Review of Resource Economics, Vol. 6, Issue 1, pp. 297-318, 2014, Available at SSRN: https://ssrn.com/abstract=2507227 or http://dx.doi.org/10.1146/annurev-resource-100913-012342

Michael Jakob

Potsdam Institute for Climate Impact Research ( email )

Telegraphenberg
Potsdam, Brandenburg 14412
Germany

Jan Steckel

Mercator Research Institute on Global Commons and Climate Change (MCC) ( email )

Torgauer Straße 12-15
Berlin, 10829
Germany

HOME PAGE: http://https://www.mcc-berlin.net/en/about/team/steckel-jan.html

Potsdam Institute for Climate Impact Research ( email )

Telegraphenberg
Potsdam, Brandenburg 14412
Germany

Ottmar Edenhofer

Potsdam Institute for Climate Impact Research (PIK) ( email )

P.O. Box 601203
14412 Potsdam, Brandenburg
Germany

Mercator Research Institute on Global Commons and Climate Change (MCC)

Torgauer Straße 12-15
Berlin, 10829
Germany

Technische Universität Berlin (TU Berlin)

Straße des 17
Juni 135
Berlin, 10623
Germany

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