Carbon leakage and agriculture
A literature review on emissions mitigation policies
The risks of carbon leakage associated with climate policies in the agricultural sector
remains under-researched. Studies to date suggest that carbon pricing policies implemented
by a single country, or small group of countries, reduce global emissions but also
affect the international competitiveness of these countries’ agricultural sectors
and induce carbon leakage. While carbon leakage can be prevented with trade-related
measures that adjust emissions prices at the border, such measures applied in developed
countries could potentially lead to significant welfare losses for developing countries
that heavily rely on agricultural exports. That said, important caveats apply to the
reviewed studies: i) from an environmental perspective, estimations of carbon leakage
rates alone do not offer a comprehensive assessment of how optimally agricultural
activities are allocated across countries; ii) most of the studies estimate the effects
of additional environmental policies, such as carbon taxes, and ignore the effects
of existing policies, including market distorting and potentially environmentally
harmful support for agricultural production.
Published on October 27, 2021
In series:OECD Food, Agriculture and Fisheries Papersview more titles