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carbon leakage





The increase in emissions in one place due to a reduction in emissions elsewhere. Carbon leakage may have occurred as a side effect of the Kyoto Protocol. Placing a cost on carbon has increased the cost of energy in Annex 1 (developed) countries. It is possible that this has had the effect of shifting business to non-Annex 1 (developing) countries where energy is cheaper because there is as yet no carbon cost scheme in operation in that country. It is also likely that technologies in non-Annex 1 countries are less efficient, making energy production higher in emissions. Thus a shift of operations from developed to developing nations brought about by the placing of a cost on carbon in one country but not the other can have the unwanted effect of causing greater global pollution. In effect the Kyoto Protocol may have the undesired effect of exporting carbon-intensive industries to the developing world.


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