Which European sectors are deemed to be exposed to Carbon Leakage under the EU ETS?
Trinomics led this project on one of the most influential components of the EU’s Emission Trading System (ETS): The Carbon Leakage List (CLL). Carbon Leakage occurs if companies transfer their production from inside EU countries towards regions with less strict climate policies than the EU – driven by the costs related to climate policy. This can lead to an increase in the global level of emissions and can harm the EU’s economy. Trinomics, together with our partners the Oeko Institute and Cambridge Econometrics, supported DG Clima in establishing the CLL for the 2021-2030 period indicating which sectors are deemed to face the risk of carbon leakage. If sectors are on the CLL, they get a certain amount of free ETS allowances (which ultimately lowers their costs).
In doing so, we analysed the EC’s consultation on the future of the CLL and the EU ETS and we designed a methodology to determine the risk of carbon leakage per sector (based on the rules set out by the ETS Directive). This methodology reflected each sector’s direct emissions intensity, indirect emissions intensity (through electricity consumption) and trade intensity. Based on this, a preliminary CCL for the 2021-2030 period was drafted, which can be found here. At a later stage, we supported DG Clima in analysing alternative requests from Member States to allow certain sectors on the CLL. Lastly, we provided support and input to DG Clima for their discussions with sectors and Member States. The final CLL has not been published yet.