Why comply when others are not bound? Emissions trading, carbon leakage and trade measures

The negative effects on the environment have been highlighted in the latest report of the Intergovernmental Panel on Climate Change (IPCC) in 2007. Furthermore, climate change is not only an environmental problem, but it is also acknowledged more and more as a development problem, especially for developing countries. One of the key challenges that the international community must face when dealing with climate change is to balance the urgent need to take action to reduce the current levels of greenhouse gas emissions in the atmosphere with the necessary changes in their economic patterns. A low carbon economy requires important changes in how developed, and developing, countries, structure their economies. It is against this wider background that this paper focuses on carbon leakage, emissions trading and trade measures within a current international scenario in which some countries might ask themselves why they should comply with stringent greenhouse gas (GHG) mitigation targets, when other countries do not.