Carbon Leakage

The problem of emission reductions in one location resulting in an increase in emissions in another location. Leakage occurs when laws or activities designed to cut greenhouse gas emissions implemented in one jurisdiction or project area lead to the movement rather than the reduction of the targeted emitting activities, such as a carbon-intensive industry moving from an Annex I nation to a non-Annex I nation in response to regulation.  Environmental policies may increase the price of some commodities such as fuel, lowering demand, causing prices to fall and demand increasing in countries without such policies.  Border carbon adjustments are a proposed response to carbon leakage.