ABSTRACT

This chapter analyzes the results from the E3ME-Asia model to see if they show evidence of carbon leakage, and then outlines the limitations of the modeling. The issue addressed in this chapter is one of political economy. Researchers have put a lot of effort into determining ways to identify those economic sectors most at risk from carbon leakage. The first stage of the assessment is to estimate the share of energy costs in each sector's production costs; for this people use the most detailed input output information that is available for each country. The estimated increase in electricity price is derived from the E3ME-Asia data on the assumption that all emissions costs are passed on; this tended to give more reliable results than the input-output information, which can include other purchases from companies in the electricity sector. If there is a carbon or energy tax, then domestic firms will face higher input costs.