The fear of carbon leakage, high-emitting industries leaving countries with stringent environmental policies in favor of doing business in countries where they can emit more, is somewhat misguided, according a report released last week by the Organization for Economic Co‑operation and Development (OECD). “An increase in the gap in environmental policy stringency between two trading countries does not have a significant effect on overall trade in manufactured goods,” the report says.
That is not to say there is no effect, the paper states. “Higher environmental stringency in a country is linked to a comparative disadvantage in ‘dirty’ industries, and a corresponding advantage in ‘cleaner’ industries. These effects are stronger for the domestic component of exports than for gross exports,” according to the report.
