Journal of Evolutionary Economics

, Volume 29, Issue 3, pp 939–971 | Cite as

What a difference carbon leakage correction makes!

  • Thomas GrebelEmail author
Regular Article


In this paper, we investigate the effect of carbon leakage correction when turning from a production-based to a consumption-based approach. We consider six different regulatory regimes. For calculating carbon leakage corrections, we employ the Leontief Inverse derived from WIOD input/output tables. To account for country-specific characteristics we use OECD data. As modelling technique, we apply a non-parametric productivity estimation approach (Data Envelopment Analysis) to calculate relative efficiency scores of countries’ environmental performance to take their heterogeneity into account. The results suggest that irrespective of the chosen policy regime, the correction for carbon leakage will always lead to a significant reduction of emissions. The average effect of leakage correction amounts to 37% less CO2 emissions.


Energy efficiency CO2-emissions DEA Benchmarking 

JEL Classification

Q48 Q56 Q58 


Compliance with Ethical Standards

Conflict of interests

The author declares to have no conflict of interest.


  1. Aichele R, Felbermayr G (2012) Kyoto and the carbon footprint of nations. J Environ Econ Manag 63(3):336–354CrossRefGoogle Scholar
  2. Aichele R, Felbermayr G (2015) Kyoto and carbon leakage: an empirical analysis of the carbon content of bilateral trade. Rev Econ Stat 97(1):104–115CrossRefGoogle Scholar
  3. Aldy JE, Barrett S, Stavins R (2003) Thirteen plus one: a comparison of global climate policy architectures. Clim Pol 3(4):373–397CrossRefGoogle Scholar
  4. Andrew R, Forgie V (2008) A three-perspective view of greenhouse gas emission responsibilities in New Zealand. Ecol Econ 68(1-2):194–204CrossRefGoogle Scholar
  5. Babiker MH (2005) Climate change policy, market structure, and carbon leakage. J Int Econ 65(2):421–445CrossRefGoogle Scholar
  6. Banker RD, Charnes A, Cooper WW (1984) Some models for estimating technical and scale inefficiencies in data envelopment analysis. Manag Sci 30(9):1078CrossRefGoogle Scholar
  7. Barrett S, Stavins R (2003) Increasing participation and compliance in international climate change agreements. Int Environ Agreements 3(4):349–376CrossRefGoogle Scholar
  8. Butnar I, Llop M (2007) Composition of greenhouse gas emissions in spain: an input–output analysis. Ecol Econ 61(2-3):388–395CrossRefGoogle Scholar
  9. Chambers RG, Chung Y, Färe R (1996) Benefit and distance functions. J Econ Theory 70(2):407–419CrossRefGoogle Scholar
  10. Charnes A, Cooper WW, Rhodes E (1978) Measuring the efficiency of decision making units. Eur J Oper Res 2(6):429–444CrossRefGoogle Scholar
  11. Copeland BR, Taylor MS (2005) Free trade and global warming: a trade theory view of the Kyoto protocol. J Environ Econ Manag 49(2):205–234CrossRefGoogle Scholar
  12. Davis SJ, Caldeira K (2010) Consumption-based accounting of CO2 emissions. Proc Natl Acad Sci 107(12):5687–5692CrossRefGoogle Scholar
  13. Dietzenbacher E, Los B, Stehrer R, Timmer M, De Vries G (2013) The construction of world input–output tables in the WIOD project. Econ Syst Res 25(1):71–98CrossRefGoogle Scholar
  14. Eder P, Narodoslawsky M (1999) What environmental pressures are a region’s industries responsible for? a method of analysis with descriptive indices and input–output models. Ecol Econ 29(3):359–374CrossRefGoogle Scholar
  15. Färe R, Grosskopf S, Hernandez-Sancho F (2004) Environmental performance: an index number approach. Resour Energy Econ 26(4):343–352CrossRefGoogle Scholar
  16. Feenstra RC, Inklaar R, Timmer MP (2015) The next generation of the Penn world table. Am Econ Rev 105(10):3150–82CrossRefGoogle Scholar
  17. Felder S, Rutherford TF (1993) Unilateral CO2 reductions and carbon leakage: the consequences of international trade in oil and basic materials. J Environ Econ Manag 25(2):162–176CrossRefGoogle Scholar
  18. Haas PM, Levy MA, Parson EA (1992) How should we judge unced’s success? Environ Sci Policy Sustain Dev 34(8):6–33CrossRefGoogle Scholar
  19. Hepburn C (2006) Regulation by prices, quantities, or both: a review of instrument choice. Oxf Rev Econ Policy 22(2):226–247CrossRefGoogle Scholar
  20. IEA (2016) OECD - net capacity of renewables. International Energy AgencyGoogle Scholar
  21. Joskow PL (2014) Incentive regulation in theory and practice: electricity distribution and transmission networks. In: Economic regulation and its reform: What have we learned? University of Chicago Press, pp 291–344Google Scholar
  22. Kondo Y, Moriguchi Y, Shimizu H (1998) CO2 emissions in Japan: influences of imports and exports. Appl Energy 59(2-3):163–174CrossRefGoogle Scholar
  23. Kumar S (2006) Environmentally sensitive productivity growth: a global analysis using Malmquist-Luenberger index. Ecol Econ 56(2):280–293CrossRefGoogle Scholar
  24. Lamperti F, Napoletano M, Roventini A (2019) Green transitions and the prevention of environmental disasters: market-based vs. command-and-control policies. Macroecon Dyn, pp 1–20Google Scholar
  25. Lenzen M, Murray J, Sack F, Wiedmann T (2007) Shared producer and consumer responsibility – theory and practice. Ecol Econ 61(1):27–42CrossRefGoogle Scholar
  26. Leontief V (1966) Input-output economicsGoogle Scholar
  27. Leontief W (1974) Sructure of the world economy: outline of a simple input-output formulation. Am Econ Rev, pp 823–834Google Scholar
  28. Malmquist S (1953) Index numbers and indifference surfaces. Trabajos de Estadistica y de Investigacion Operativa 4(2):209–242CrossRefGoogle Scholar
  29. Mattoo A, Subramanian A (2013) Greenprint: a new approach to cooperation on climate change. CGD Books, LondonCrossRefGoogle Scholar
  30. Meng B, Zhang Y, Inomata S (2013) Compilation and applications of IDE-JETRO’s international input–output tables. Econ Syst Res 25(1):122–142CrossRefGoogle Scholar
  31. Mizutani F (1997) Empirical analysis of yardstick competition in the Japanese railway industry. International Journal of Transport Economics/Rivista internazionale di economia dei trasporti, pp 367–392Google Scholar
  32. Munksgaard J, Pedersen KA (2001) CO2 accounts for open economies: producer or consumer responsibility? Energy Policy 29 (4):327–334CrossRefGoogle Scholar
  33. Newell RG, Pizer WA, Raimi D (2013) Carbon markets 15 years after Kyoto: Lessons learned, new challenges. J Econ Perspect 27(1):123–46CrossRefGoogle Scholar
  34. Oliveira-Martins J, Burniaux J-M, Martin JP (1992) Trade and the effectiveness of unilateral CO2-abatement policies: Evidence from green. OECD Econ Stud, pp 123–123Google Scholar
  35. Peters GP (2008) From production-based to consumption-based national emission inventories. Ecol Econ 65(1):13–23CrossRefGoogle Scholar
  36. Peters GP, Hertwich EG (2008) Post-kyoto greenhouse gas inventories: production versus consumption. Clim Chang 86(1-2):51–66CrossRefGoogle Scholar
  37. Resende M (2002) Relative efficiency measurement and prospects for yardstick competition in Brazilian electricity distribution. Energy Policy 30(8):637–647CrossRefGoogle Scholar
  38. Resende M, Façanha LO (2005) Price-cap regulation and service-quality in telecommunications: an empirical study. Inf Econ Policy 17(1):1–12CrossRefGoogle Scholar
  39. Ritz RA (2009) Carbon leakage under incomplete environment regulation: an industry-level approach. Department of Economics (University of Oxford)Google Scholar
  40. Rozenberg J, Vogt-Schilb A, Hallegatte S (2018) Instrument choice and stranded assets in the transition to clean capital. J Environ Econ ManagGoogle Scholar
  41. Sawkins JW (1995) Yardstick competition in the English and Welsh water industry fiction or reality? Util Policy 5(1):27–36CrossRefGoogle Scholar
  42. Sawkins JW, Accam B (1994) Comparative efficiency measurement in the Scottish water industry: an application of data envelopment analysis. University of Aberdeen, Department of EconomicsGoogle Scholar
  43. Serrano M, Dietzenbacher E (2010) Responsibility and trade emission balances: an evaluation of approaches. Ecol Econ 69(11):2224–2232CrossRefGoogle Scholar
  44. Shleifer A (1985) A theory of yardstick competition. RAND J Econ, pp 319–327Google Scholar
  45. Stern N (2007) The economics of climate change: the Stern review. Cambridge University Press, CambridgeCrossRefGoogle Scholar
  46. Sueyoshi T, Goto M (2012a) Data envelopment analysis for environmental assessment: Comparison between public and private ownership in petroleum industry. Eur J Oper Res 216(3):668–678Google Scholar
  47. Sueyoshi T, Goto M (2012b) DEA radial and non-radial models for unified efficiency under natural and managerial disposability: Theoretical extension by strong complementary slackness conditions. Energy Econ 34(3):700–713Google Scholar
  48. Sueyoshi T, Goto M (2013) DEA Environmental assessment in a time horizon: Malmquist index on fuel mix, electricity and CO2 of industrial nations. Energy Econ 40(0):370–382CrossRefGoogle Scholar
  49. Timmer MP, Dietzenbacher E, Los B, Stehrer R, de Vries GJ (2014) The world input-output database: Content, concepts and applications. Working paper, GGDC. Relation: Rights: University of Groningen
  50. Timmer MP, Dietzenbacher E, Los B, Stehrer R, De Vries GJ (2015) An illustrated user guide to the world input–output database: the case of global automotive production. Rev Int Econ 23(3):575–605CrossRefGoogle Scholar
  51. United Nations Statistical Division (1999) Handbook of input-output table compilation and analysis, volume 74. UNGoogle Scholar
  52. Wagner UJ, De Preux L (2016) The co-benefits of climate policy: Evidence from the EU emissions trading schemeGoogle Scholar
  53. Walter I (1973) The pollution content of American trade. Econ Inq 11(1):61–70CrossRefGoogle Scholar
  54. Weitzman ML (1974) Prices vs. quantities. Rev Econ Stud 41(4):477–491CrossRefGoogle Scholar
  55. Weyant JP, Hill J (1999) The costs of the Kyoto protocol. The Energy Journal (Special Issue)Google Scholar
  56. Wiedmann T (2009) A review of recent multi-region input–output models used for consumption-based emission and resource accounting. Ecol Econ 69(2):211–222CrossRefGoogle Scholar
  57. Zhou P, Ang B, Han J (2010) Total factor carbon emission performance: a Malmquist index analysis. Energy Econ 32(1):194–201CrossRefGoogle Scholar
  58. Zhou P, Ang B, Poh K (2008) A survey of data envelopment analysis in energy and environmental studies. Eur J Oper Res 189(1):1–18CrossRefGoogle Scholar
  59. Zofío JL, Prieto AM (2001) Environmental efficiency and regulatory standards: the case of CO2 emissions from OECD industries. Resour Energy Econ 23(1):63–83CrossRefGoogle Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.TU IlmenauIlmenauGermany

Personalised recommendations