Carbon leakage prospects under Phase III of the EU ETS and beyond

On behalf of the UK Department of Energy and Climate Change, Vivid Economics performed detailed modelling of the extent of possible carbon leakage scenarios in the EU under different future carbon prices. The current criteria used by the European Commission in determining whether a sector is at risk of leakage were evaluated and compared against the available alternatives. In addition, a review was conducted of the likely effectiveness of the different policy options available for combating leakage. Ten sectors were considered in detail, with a separate case study document examining the likely effect of carbon prices on their market share, emissions and international competitiveness.