Global initiatives to prevent "carbon leakage": risks and opportunities for Russia

Abstract

Tightening climate policies in some countries brings about a need to toughen them in others. More stringent requirements for national producers of carbon–intensive products within one country, for example, in the form of increased coverage or level of domestic carbon price, stimulates partial replacement of domestic production with foreign analogs from the countries with relatively looser greenhouse gas emissions regulation. This phenomenon is referred to as “carbon leakage”. This paper systematizes practical and theoretical approaches to combat “carbon leakage” and compares these approaches in terms of possible implications for a longterm social and economic development of Russia. The authors examine exceptions to the general rules of emissions regulation for some vulnerable industries subjected to “carbon leakage”, implementation of cross-border carbon barriers in trade, formation of climate clubs of countries and the introduction of a global minimum carbon price. Specialization in producing and exporting carbon-intensive products leaves no opportunity for Russia to stay aside of the development of the global system of greenhouse gas emissions regulation. The findings show that introducing a global minimum price for carbon seems to be the best alternative to the formation of a climate club, which may be established if other countries importing fossil fuels and carbon-intensive products join the EU carbon border adjustment policy.