Close the carbon loophole: ending the game of CO2 "whack-a-mole"

Michael Mehling, Alice Pirlot, Pajal Pradhan, Emma Aisbett, Christoph Böhringer, Emanuel Asane-Otoo, Jan Schneider, Dabo Guan, Moana Simas, Kirsten Wiebe, Hauke Ward

Research output: Contribution to journalArticle

1 Citation (Scopus)


International trade complicates the choice of climate policies. Policymakers have traditionally relied on demand-side constraints such as taxes or standards to curb greenhouse gas emissions (GHGs). But there is a snag: these policies add to the cost of producing goods that cause emissions. When goods are traded globally, production relocates to where it can occur at the lowest cost, leading to emission leakage: emission reductions achieved by progressive nations will be partly offset by rising emissions elsewhere, where producers face fewer constraints. Some countries are now considering policies to reduce emission leakage by extending carbon constraints to imported goods. But these policies can only close the loophole for the domestic market and altogether fail to address another form of leakage: displaced fossil fuel consumption. As nations with stringent carbon constraints lower their demand for fossil fuels, falling prices on the global market stimulate consumption elsewhere. Supply-side policies such as fossil fuel phase-outs can help, but they rely on broad participation to have a global impact. So far, history has shown only one way to effectively escape this game of CO2 "whack-a-mole": bringing down the cost of clean technologies. Only when these can compete on their own with incumbent technologies will they find universal uptake, as has become the case with renewable energy. In the presence of international trade, support policies for clean technology are thus key for global decarbonization so that trade helps diffuse—rather than undermine—solutions to climate change.
Original languageEnglish
Pages (from-to)587-590
Number of pages4
JournalOne Earth
Issue number5
Publication statusPublished - 21 May 2021


  • carbon loophole
  • CO2
  • whack-a-mole
  • international trade
  • climate policies


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