Ambitious EU climate efforts could increase emissions in the rest of the world

However, should the EU implement its most ambitious decarbonization agenda, while the rest of the world continues with the status quo, non-EU nations will end up emitting more greenhouse gases, thereby significantly offsetting the reductions of EU emissions. This is the conclusion of a new policy brief prepared by economics experts at the University of Copenhagen's Department of Food and Resource Economics.

For every tonne of CO₂ emissions avoided in the EU, around 61.5% of that tonne will in that case be emitted somewhere else in the world. This carbon leakage, as it is known, will result in a global CO₂ savings of 385 kilos only. The policy brief is based on the conclusions of a purposely-built economic model. The model, part of the EU Horizon 2020 project EUCalc, seeks to describe various pathways to decarbonizing the EU economy.

"Obviously, the EU's own climate footprint will be significantly reduced. But the EU's economy is intertwined with the rest of the world through trade relations, which would change as we implement a green transition in our energy sector, industries and ways of life. Part of the emissions that Europe "saves" through an extensive green transition could possibly be 'leaked' to the rest of the world through, among other things, trade mechanisms, depending on the climate policy of other countries," according to economist and brief co-author Professor Wusheng Yu, of the University of Copenhagen's Department of Food and Resource Economics.

"If the world beyond the EU does not follow suit and embark on a similar green transition, the decline in global greenhouse gas emissions will effectively be limited and well below the level agreed upon in EU climate policy," adds co-author, economist and Yu's department fellow, Francesco Clora.

Less exports, more imports

In the most ambitious 2050 scenario as calculated by the EUCalc model, the EU pulls all of the green levers for production and consumption in various sectors, including the industrial and energy sectors.

In this scenario, a green transformation of CO₂-intensive industries (e.g. concrete, steel and chemicals) will incur new costs for new green technologies, which in turn, will increase the price of products. This could impact the competitiveness of EU products on the global market and be advantageous to China and the United States, who would be continuing their production of similar, yet cheaper goods. The prediction is that fewer goods would then be manufactured in Europe, which would lead to an increase in new imports to satisfy consumer and commercial demand.

Similarly, a phase-out of fossil fuels by the EU would lower global demand, thus making them cheaper. In response, non-EU countries would be likely to import and consume larger quantities of fossil fuels.

Finally, more climate-friendly consumer behaviour in the EU could end up pushing part of the saved CO₂ out into the rest of the world as well. For example, while a decrease in red meat consumption by Europeans may reduce imported feed grains such as soybean, it may also result in increased imports of food grains and other plant-based foods the latter of which would increase CO₂ emissions in the rest of the world.

So what should the EU do?

Should Europe simply throw in the towel and drop its high ambitions for a better global climate? Certainly not. But we must make sure not to go it alone. Professor Wusheng Yu explains:

"A green transition in the EU alone cannot significantly reduce global CO₂ emissions. We need to find ways to get others on board. Otherwise, the impact of our efforts will be largely offset by increased emission elsewhere, making it impossible to meet the Paris Agreement targets in time."

Therefore, Professor Yu says that it is essential for the EU to formulate green strategies for each sector and every member state, while taking these economic mechanisms into account and carefully evaluating their impact, when it comes to encouraging other countries to pursue similar decarbonization strategies.

FACTS:

• If the EU implements a very ambitious climate strategy while the rest of the world maintains the status quo, the EU-Calc model forecasts a CO₂ leakage of about 61.5%. This means that for every tonne of CO₂ that the EU ceases to emit, the rest of the world will increase emissions by 615 kilos of CO₂. The calculation is based on average CO₂ emissions in EU countries.
• Read the brief, 'Implications of decarbonizing the EU economy on trade flows and carbon leakages', here
• The results are generated from a purpose-built economic model fed with detailed data collected from a wide range of sectors in all EU member states, plus the UK and Switzerland.
• The EUCalc project aims to describe various pathways towards a green transition in the EU. In addition to the open source model (including the economic module), the project has developed a web tool where users can calculate CO₂ emissions themselves according to different scenarios.
• EUCalc is a partnership among 12 institutions located in 9 European countries and funded by the EU Horizon 2020 programme.