Rahel Aichele, Gabriel Felbermayr, 04 February 2010

Production-based CO2 emission targets can give rise to carbon leakage, as firms relocate to countries without carbon policies. This column shows that Kyoto countries’ embodied CO2 imports have been increasing by about 50% since the Protocol was signed. Climate policies may have lead to additional carbon imports without sizeable domestic reductions. Consumption-based targets should therefore play a more prominent role in climate policies.

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