Challenges in the Measurement of Leakage Risk

Concerns about emissions leakage, i.e., the increase in emissions in foreign jurisdictions induced by a domestic emissions regulation, loom large in debates about unilateral climate change policy. Correctly identifying the kinds of economic activities most at risk of carbon leakage is a critical first step in the design of effective leakage mitigation. We briefly summarize current approaches to assessing leakage risk and highlight a sizable gap between academic research and real-world policy implementation. An emerging research agenda that aims to close this gap is discussed.