Authors: Jim Sinner , Suzie Greenhalgh , Suzi Kerr
1. Some products or processes in New Zealand may be disadvantaged in international markets because they face a carbon price, whereas competing suppliers of the same or similar products do not. This may result in emissions leakage, which arises when a product’s manufacture is re-located to countries without a carbon cap, leading to no (or a smaller) net decrease in global greenhouse gas (GHG) emissions and potential economic and social disruption from the re-location of that production.
2. Policy design should:
3. Two options that reduce or avoid emissions leakage are output-based free allocation or border tax adjustments for trade exposed emissions-intensive products or processes.
4. There will be no perfect option for addressing trade exposed emissions intensive products or processes and emissions leakage; all involve some form of compromise.