27 October 2008: The International Energy Agency (IEA) has released a report that explores the vulnerability of heavy industry to carbon leakage – namely the movement of production away from jurisdictions where carbon constraints exist to jurisdictions where they do not – and competitiveness loss.

It reviews the existing literature on competitiveness and carbon leakage under uneven climate policies. It also suggests a statistical method to indicate possible carbon leakage, and applies this methodology to Phase I of the EU emissions trading scheme, for various industrial activities: iron and steel, cement, aluminum and refineries. Finally, it also assesses a number of proposed policy measures to mitigate carbon leakage based on a selection of economic and environmental criteria, as discussed in Australia, Canada, Europe, New Zealand and the US. [The Report]