The Just Transition Challenge: Avoiding Carbon Leakage and Jobs Off-Shoring in Decarbonising 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 of potential carbon leakage and associated offshoring of jobs and economic value (GDP) if carbon reduction policies impact the location decisions of industry. We use economic multiplier metrics to 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 global CO2 emissions. Our key conclusion is that a strong argument exists to address the industrial decarbonisation challenge where emissions are currently located. The ‘just transition’ element of the Paris agreement emphasises the need to retain and grow jobs and GDP whilst meeting climate targets in the long term. This will always be a preferable outcome over jobs off-shoring/GDP loss and not meeting targets in the short and long term.