Carbon pricing is now in place across Canada. Its main aim is to encourage behaviours and technology adoptions that lead to reductions in greenhouse gas (GHG) emissions. But carbon pricing can also result in unintended—and undesirable—consequences.
One such consequence is “carbon leakage.” It occurs when firms that face incremental costs from carbon pricing relocate their activities to jurisdictions with less stringent policies—simply shifting, rather than reducing global emissions. Emissions-intensive and trade-exposed industries (EITEIs) are the most exposed to the risk of carbon leakage.
Leakage has been studied extensively in other jurisdictions (like the EU), but little work is publicly available on this important subject for Canada. Tipping the Scales: Assessing Carbon Competitiveness and Leakage Potential for Canada’s EITEIs provides a data-driven and evidence-based approach to begin to fill a knowledge gap with respect to this important social, economic, and environment policy issue in the Canadian context.