Risk of carbon emission leakage through international trade of fossil-based e-fuels under regionally differentiated climate policies

Electrofuels (e-fuels) produced from captured CO 2 and hydrogen are expected to replace fossil fuels in hard-to-abate sectors. However, when the carbon originates from fossil-based sources, international trade of these fuels risks transferring CO 2 emissions across borders in the form of carbon leakage that undermines the climate goals. This study employed a global techno-economic energy system model to assess the leakage risk under various climate policy scenarios. The results indicate that approximately 0.5 Gt CO 2 , accounting for 17% of OECD (Organization for Economic Co-operation and Development) country emissions by 2050, can be transferred to non-OECD through fossil-based e-fuels under heterogeneous climate policies. Including the carbon footprint of e-fuels in consumer-side emission accounting with effective carbon pricing largely eliminates this leakage and instead promotes carbon-neutral e-fuels. Harmonized global climate policies are similarly effective. These findings underscore the importance of a well-defined policy framework, such as carbon border adjustments for e-fuel trade, similar to those in place for hydrogen in the European Union.