leakage

The idea of leakage has arisen in a few of my blog postings, so I thought it would be a good idea to examine the meaning of this term. On February 25, I listed a few measures which must be taken in order to validate carbon offsets. One of these is that the seller of the offset must provide "evidence for no increase in emissions elsewhere as a result of project". In a nutshell, this explains the issue of leakage.

The Intergovernmental Panel on Climate Change (IPCC) Third Assessment Report, from 2001, gives a clear description of leakage in the mitigation section of the report:

"Leakage refers to the situation in which a carbon sequestration activity (e.g., tree planting) on one piece of land inadvertently, directly or indirectly, triggers an activity which, in whole or part, counteracts the carbon effects of the initial activity. It can be shown that most of these types of problems arise from differential treatment of carbon in different regions and circumstances, and the problem is not unique to carbon sequestration activities but pervades carbon mitigation activities in the energy sector as well."

A simple example of leakage, provided by the report, is when a piece of land or wetland set aside for preservation results in a different piece of land being cleared instead. A more complex instance of leakage can arise when carbon forests are paid for timber and carbon credits, but industrial forests are only paid for wood production, and not for carbon credits. In this scenario, timber companies may invest less in new forests, in anticipation of future timber production from carbon forests. Some of the carbon credits gained from carbon forests would therefore be nullified by the reduction in new forest planting by the timber industry. According to the IPCC's 2001 report:

"Leakage from industrial forests, resulting from forests established for carbon purposes, has been estimated by Sohngen and Sedjo (1999) to be about 40%, globally, assuming that all carbon forests are made available to the timber market."

The report suggests that national caps on total emissions would help alleviate the problem of leakage within national boundaries. In order to resolve the problem of leakage between nations, however, global caps would have to be implemented. This week, members of the European Union are meeting to discuss just such a system. They are working on the implementation of a cap-and-trade package which would require industrial emissions to be cut by 20% by the year 2020. Some have expressed concerns that capping industrial emissions in European countries will simply drive industries to countries outside of the EU. The resulting leakage would not only make industrial emissions caps ineffective in terms of reducing global atmospheric greenhouse gas levels, but it would also penalize those industries adhering to emissions caps within the EU. According to an article published yesterday in The Canadian Press:

"To prevent such "carbon leakage," the EU will insist on an international emissions plan to make the fight against climate change truly global and to create a level playing field for industries worldwide. The EU has said its emission system can easily be linked to a global network of pollution auctioning rights."

More about how the EU will impose and enforce an international emissions plan in the next post...