International trade and carbon leakage

A criticism of the Kyoto Protocol is that emissions from international specialisation and trade could be shifted to non-Kyoto countries (carbon leakage). The analysis of sectoral import flows and the associated CO2 imports show that the Kyoto countries increase their import volume from non-Kyoto countries and that CO2 imports rise by an average of 8%, with energy-intensive sectors, such as metal products and paper goods, being particularly affected. Consequently, the international policy community should devote more attention to how a CO2 marginal compensation tax could be implemented in conformance with WTO regulations.