A Canadian Example of Emissions Leakage

The term “leakage” likely conjures thoughts of a dripping faucet. In the context of greenhouse gas policy and accounting, “leakage” refers to a policy or practice that causes an emission reduction in one geographical area, but inadvertently causes an increase in emissions in another area. Leakage could also be temporal causing a reduction of emissions today, but increasing emissions in the future.

As Canadian greenhouse gas policy develops, we must be careful to avoid leakage, lest our efforts are for naught. An important potential leakage pathway we must analyze is the import of goods. If greenhouse gas policy in Canada causes a reduction of domestically produced goods and a related increase in imports from jurisdictions that do not have equivalent greenhouse gas policies, we could be simply shifting greenhouse gas emission to another jurisdiction. Imports of oil and gas into Canada are a good example of this scenario. Stewart Muir of the Resource Works Society (www.resourceworks.com) is the author of a though provoking column about this issue: Canada’s dependence on imported fossil fuels reaches a whole new level.

I propose a new term, “reverse leakage”. This would occur when greenhouse gas policy in Canada reduces the carbon intensity of ourexports. More on that idea in a future blog post.