Beyond Carbon Leakage: Off-Shoring of Employment and GDP in Decarbonizing International Supply Chains

Industrial decarbonisation is a major challenge in terms of both emissions reduction and the ‘just transition’ element of the 2015 Paris agreement. It raises issues in terms of potential carbon leakage and associated off-shoring of jobs and GDP where carbon reduction impacts the location decisions of production. We propose that economic multiplier metrics can help quantify the extent of these potential displacement effects. Focussing on cement production as a particular decarbonisation challenge, we demonstrate that displacement of currently EU-based production activity could potentially lead to reductions in domestic jobs and GDP, combined with a net increase in world CO2 emissions.